- Decision
- Maintain
- Rate change
- 0 bps
- two-week repo rate
- 3.5%
The Bank Board of the Czech National Bank (CNB) kept the two-week repo rate at 3.5 percent, warning that stubborn domestic price pressures—high services inflation, brisk wage growth and a recovering property market—require maintaining a relatively tight stance as inflation is forecast to stay above the 2 percent target this year and core inflation elevated across the horizon. Following two 25 bp cuts between February and May that lowered the rate from 3.75 percent, the easing cycle is now on hold. The Board aims to limit money and credit expansion, noting that the current rate level continues to restrain lending. Headline inflation is seen above target, while GDP grew 2.2 percent year on year in 2025 Q1 and average wages increased 6.7 percent, supported by household consumption; external demand remains weak owing to a downturn in European industry. The CNB judges risks to the inflation outlook as skewed to the upside and will calibrate policy against forthcoming data on services-price inertia, wage and credit trends, fiscal developments, koruna moves and the global policy and geopolitical backdrop.
Rate evolution
The Czech National Bank lowered the two-week repo rate by 25 basis points to 3.5%, held it in December and again in March and May 2026, raised it by 25 basis points to 3.75% on 18 June, and kept it unchanged on 6 August and 17 September, when all seven members backed the hold. It said easing room was limited because domestic inflation pressures persisted even with inflation near or within the tolerance band around the 2% target, citing elevated core and services inflation, strong wage growth, a tight labour market, firmer household consumption, rising property prices and strengthening credit and money growth, while weak external demand, trade barriers and geopolitics clouded activity. Across the December, March and May holds, the Bank Board continued to describe policy as relatively tight, while its risk assessment moved from modestly inflationary overall to inflationary overall and then balanced overall as domestic upside risks were increasingly offset by a stronger koruna, weak euro area activity and the risk of a global asset-price correction.
In June, the Bank Board returned the risk assessment to inflationary overall and said the increase would help lower core inflation and maintain a low-inflation environment, while on 6 August it judged that the move had delivered the desired tightening of monetary conditions and shifted to assessing incoming data, the outlook, inflationary risks and the effects of policy restriction as core inflation remained just below 3% without a significant downward tendency for eight months. On 17 September, it said the June increase had so far sufficiently tightened monetary conditions and that higher longer-term interest rates had also tightened financial conditions, although core inflation remained elevated and the upside risk from commodity market developments had intensified. The Bank Board again assessed risks as inflationary overall, citing persistent core and services inflation, credit growth and debt-financed public spending, rapid wage growth, a tight labour market and property prices, while weak euro area activity and a possible global asset-price correction could have an anti-inflationary effect, and said continued tight monetary policy was needed, with its next decision to be between holding the policy rate and raising it.