On Wednesday the 26th of September (11:00, GMT), Czech Republic’s CNB is expected to announce its interest rate decision.

Currently CZK OIS imply a probability of 85.66% for the bank to cut rates by 25 basis points and reach as low +1.00%, however we reject this scenario.

The Czech economy enjoys rather favorable financial indicators, an inflation rate at +2.5% yoy, low unemployment 3.1% and a healthy GDP growth rate of +2.4% yoy, which could support the idea of a rate hike.

The bank’s past meeting minutes as well as a number of analysts support the notion for a 25 basis points rate hike towards the +1.50% level from current +1.25%.

Should the CNB deliver its third rate hike, the third in three consecutive meetings, we could see the CZK strengthening.