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CEE MARKETS-Crown jumps to 1-1/2 year high on rate hike hopes

·3 min read

By Jason Hovet PRAGUE, Sept 16 (Reuters) - The crown hit its highest since February 2020 - when the COVID-19 pandemic first started rattling markets - on Thursday amid a growing debate over whether the Czech central bank could speed up its rate hiking cycle. In stock markets, central European indices rose, with Prague leading gains, as Czech utility CEZ touched a fresh nine-year high on rising wholesale power prices. The Czech Republic and Hungary were the first two European Union countries to see rising interest rates, as their central banks seek to tame price pressures coming as economies recover from the pandemic. Central Europe is facing a combination of domestic pressures, like tightening labour markets and post-pandemic consumer demand, and external factors like those caused by global supply snags and rising energy and materials costs. Data on Thursday showed Czech producer prices grew at the fastest annual rate since 1993, adding to arguments that the central bank may need faster interest rate hikes. Central banker Marek Mora was also quoted by Bloomberg in an interview published on Thursday as saying odds were moving closer to the chance of a heftier 50 basis point rate hike. The crown was up 0.3% at 25.255 to the euro at 0929 GMT. Komercni Banka said on Thursday it saw the Czech National Bank's key interest rate rising to 2.00% by the end of the year, up from 0.75%, and indicating a faster tempo of hikes than the standard 25 basis point increase taken at the last two meetings. "Yes, it is fast, but the financial market is pricing in something similar," Komercni Banka said in a note, adding that rate hikes would not have to be so big next year if inflation slowed. The crown still remains off pre-pandemic levels of 24.77 to the euro touched in mid-February 2020, before markets starting retreating as COVID-19 infections gathered pace around the world. Hungary's forint is also still off pre-COVID-19 highs, but has gained almost 4% this year - same as the crown - as interest rates there also rose. On Thursday, it was steady at 349.15 to the euro. The Polish zloty fell 0.1% and continued to lag as Poland's central bank keeps policy loose despite inflation hitting a two-decade high. "Prolonging the period of ultra-low interest rates poses a risk of growing imbalances in the economy, and delaying the start of this process may increase the cost of bringing inflation down to the target," Bank Millennium said on Thursday. CEE SNAPSHO AT MARKETS T 1129 CET CURRENC IES Latest Previou Daily Change s bid close change in 2021 EURCZK Czech EURHUF Hungary 0 0 EURPLN Polish EURRON Romanian EURHRK Croatian EURRSD Serbian 0 0 Note: calcula 1800 daily ted CET change from STOCKS Latest Previou Daily Change s close change in 2021 .PX Prague 1304.39 1295.16 +0.71% +26.99 00 % .BUX Budapest 52558.1 52317.9 +0.46% +24.82 5 1 % .WIG20 Warsaw <.WIG20 2365.19 2355.23 +0.42% +19.21 > % .BETI Buchares 12354.4 12288.1 +0.54% +25.99 t 5 2 % .SBITO Ljubljan <.SBITO 1171.70 1172.78 -0.09% +30.07 P a P> % .CRBEX Zagreb <.CRBEX 1970.86 1969.22 +0.08% +13.31 > % .BELEX Belgrade <.BELEX 800.56 802.75 -0.27% +6.94% 15 15> .SOFIX Sofia <.SOFIX 562.27 566.90 -0.82% +25.64 > % BONDS Yield Yield Spread Daily (bid) change vs Bund change in Czech spread Republic CZ2YT= 2-year s CZ5YT= 5-year s CZ10YT s Poland PL2YT= 2-year s PL5YT= 5-year s PL10YT s FRA 3x6 6x9 9x12 3M interba nk Czech Hungary Poland Note: FRA quotes are for ask prices *********************************** *************************** (Reporting by Jason Hovet in Prague and Alicja Ptak in Warsaw; Editing by Amy Caren Daniel)

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