Ella 
The Czech National Bank (CNB) announced the end of the foreign exchange intervention regime. This means that the central bank will no longer use foreign exchange intervention to prevent currency weakness. However, since the intervention has not been used recently, this does not actually make a difference. In addition, if a new emergency arises, the Czech central bank can announce again and restart intervention measures. As such, any currency weakness resulting from the market’s knee-jerk reaction is likely to be reversed in the coming quarters.
In 2024, we see a risk of further CZK depreciation. The main risk is that inflation may not fully slow down to the target level, which would again affect the credibility of the Czech Bank. In addition, a debate erupted between the government and the central bank, as the latter criticized expansionary fiscal policy as the culprit for high inflation. If inflation becomes as stubborn as we expect, these developments could add to CZK volatility again next year.
