Central Bank Interest Rate Changes in Czech Republic, Sweden and Brazil – Currency Thoughts

Central Bank Interest Rate Changes in Czech Republic, Sweden and Brazil

November 7, 2024

There’s been a 25-basis point cut of the Czech National Bank’s two-week repo rate to 4.0%. It’s the eighth reduction since last December (four times by 50 bps and four times by 25 bps including the most recent three occasions). Consumer price inflation of 2.6% in September is still above the target of 2.0%, and service sector prices in particular have not fallen as much as desired. A released statement today asserts that as officials approach future policy reviews, “the interest rate reduction process can be paused or terminated in the months ahead at levels that are still restrictive as rates approach their neutral levels.”

In Sweden, real GDP fell by 0.3% and then 0.1% more in the second and third quarters of this year. That’s weaker than monetary officials had assumed. In conjunction with sub-target inflation of 1.6% in both September and October, a stepped up pace of interest rate reduction was deemed appropriate, according to a released statement. “the policy rate may also be cut in December and during the first half of 2025.” Several risks continue to be monitored, however, such as geopolitical tensions, the economic policy abroad, an the krona exchange rate. Today’s Riksbank rate cut of 50 basis points to 2.75% was the largest reduction since February 2009 and follows a trio of 25-bp cuts earlier this year in May, August and September.

Brazil’s 50-basis point central bank interest rate hike to 11.25% followed an initial 25-bp hike in September that interrupted an earlier cycle of cuts totaling 300 basis points between August 2023 and June 2024. A statement from officials expresses concern of service sector costs, de-anchored price expectations, and the risk of currency depreciation. Brazilian CPI inflation of 4.4% in September was close to the target range ceiling and not projected below 4.0% next year.

Copyright 2024, Larry Greenberg. All rights reserved. No secondary distribution without express permission.

Tags: Bank of Brazil, Czech National Bank, Swedish Riksbank

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