Czech Rep: Euro-zone clouds outlook, policy to be eased further

Renewed weakness in Germany and the crisis in Russia will weigh on the Czech Republic’s key export sector in the coming quarters. However, the conditions are in place for domestic demand to strengthen, which should drive steady, if unspectacular, growth rates this year. Meanwhile, both headline and core inflation are set to remain subdued, and we think that it is more likely than not that the National Bank will loosen monetary policy further by shifting the exchange rate ceiling to a weaker level.