The Czech central bank will exit its cap on currency strength in the second quarter, a Reuters poll showed on Wednesday, despite rate setters' signals they would not rush even as investors increasingly pile into crown markets. The central bank meets for a regular monetary policy meeting on Thursday and most analysts do not expect it to change its outlook for the crown cap. The bank has pledged to keep it until at least the second quarter while saying a likely exit would come in mid-2017.
Central bankers have tried to temper investor expectations of a sudden crown jump once the crown floats freely again. Market speculation pushed the bank to buy billions of euros last month at a pace not seen during the cap's three-year existence, raising pressure on the cap. Inflation being back at the bank's target is also bolstering expectations of an exit.
In comments since the latest consumer price data came out on Jan. 10, central bankers have stuck to the bank's outlook of keeping the intervention regime throughout the first quarter while seeing a likely exit in the middle of this year.
In the poll, 10 out of 14 respondents saw the exit in the second quarter, of which three forecast it in April and four in May. One said June and the others did not specify. This compares with a poll just after December inflation was published - and before a steady stream of policymakers' public comments - that had 13 of 16 analysts also putting the exit in the second quarter.
This week's poll shows that analysts see inflation and bulging foreign exchange reserves - which stood at 46.5 percent of economic output at the end of 2016 - likely to force the bank's hand.
The central bank has repeatedly said it wants to see inflation fulfilling its 2 percent target in a sustainable way before ending its cap on the crown firming past 27 to the euro. Vice-Governor Vladimir Tomsik told Reuters in an interview on Jan. 25 he still saw mid-2017 as the right time for an exit.
He also cautioned that investors could get "burnt" if they bet on the crown to only strengthen once free as they face shallow markets. Investors have built large positions in crown markets. The central bank's balance sheet for Jan. 1-20 showed receivables from abroad jumped by 358.5 billion crowns, or 13.3 billion euros, indicating sizeable market interventions. Official intervention data for January is due in March.The bank bought a total of 13.6 billion euros from the market last year between January and November.