On Thursday, the Czech National Bank did what central banks are supposed to do sometimes: it surprised the market and pissed off some politicians. Everyone knew it would raise the base rate at a scheduled meeting of the governing council, but the expectation was for a third consecutive 0.25% nudge. Instead, the rate shot up 75 bps to 1.5%. At the beginning of summer, that rate (the 2-week repo rate) was just 0.5%. The bank appears to have been spooked at August’s inflation numbers which came in at 4.1% – the highest in 13 years. Hospodářské noviny notes that a Česká spořitelna analyst is predicting December’s consumer inflation to rise by as much as 5%.
To remain relevant, central banks have to walk a fine line between acting predictably and keeping investors on their toes. The fact that market observers were caught off guard doesn’t mean the CNB was correct, of course. That, as usual, remains to be seen. But the fact that Prime Minister Andrej Babiš got angry is also positive, since it suggests that there is still a healthy division of power between the government and the central bank.
Asked what he made of the rate hike, analyst Mark Robinson (Encor Wealth) said the CNB was probably trying to claw its way back to pre-Covid levels of 2.25% “as quickly as possible and then assess the situation from there. COVID is/was a disruption of global origin, much like the GFC. I guess interest rates will go higher than 2.25% during 2022 and borrowers will have to adjust to this reality. Yesterday’s action will impact mortgage funding rates first.”
Unlike the CNB, monument preservation officials in northern Moravia were mind-numbingly predictable in their condemnation of Ostrava Tower. The 235 meter high-rise is being planned next to the Nova Karolina shopping center. Czech Television quoted the city’s preservation boss Michal Zezula whose comments sound the same as every other quote ever uttered about a planned high-rise in the Czech Republic. “The new building, if it were to be realized, would intrude radically into the panorama so that the architectural values of the historic center of Ostrava would be permanently influenced by this huge mass.” He claimed the building doesn’t respect the master plan, but that’s not surprising since ‘haters gonna hate‘. Luckily for people interested in change, Ostrava’s city architect Ondřej Vysloužil has a different opinion. He praised the investor’s attempts to connect the building to the city’s traffic system and to the surrounding public space. He said the building could bring people and badly needed energy to the center of town.
The Polish retailer HalfPrice has entered the Czech market by taking 1,800 sqm at Galerie Harfa in Prague. The company, which is part of the CCC group, buys branded goods directly from producers and offers the at lower prices. It launched this May in Poland, where it’s already opened 27 shops and has since begun operations in Austria, Hungary and Croatian. The company claims it should have 65 locations up and running by the end of the year. Further Czech stores are expected to open next year.
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