It’s hard to draw intuitive and personal odds for the two paths. The real interest rate, as measured against headline inflation, seems a bit too high, indeed, as it hovers around 2.5%. At the same time, when measured against core inflation, 1% seems rather bearable, especially as Governor Ales Michl pledges real positive rates ahead, for all the right reasons, in our view. And you can always argue that, as a forward-looking institution, you should focus on inflation nearing the target beyond this temporary low-inflation phase, which was largely a one-off driven by government measures.
Moreover, inflation undershooting the target a bit is not a big deal after the serious inflationary wave between 4Q 2021 and 2023, and after inflation was somewhat above the target in the last two years. Any harmful deflation is not really in sight with the economy humming at around a 2.7% growth rate. Summa summarum, we tilt a bit more towards the one summer cut and done option for now, with 3.25% providing a decent base for an expanding economy in 2027, and we maintain this as our base case scenario. As always, the timing is key, and we agree that the March and August one-two-punch is also an appealing option.