- Decision
- Maintain
- Rate change
- 0 bps
- two-week repo rate
- 3.5%
The Czech National Bank (CNB) left its two-week repo rate unchanged at 3.5%, with all seven board members backing the decision, citing still-elevated core and services inflation, brisk wage growth and a 4.1% annual rise in money supply that “currently preclude a further decrease in interest rates”. After cutting the rate by a cumulative 350 bp since December 2023—most recently by 25 bp in May—the CNB has now held it steady in both June and August. The board reiterated that relatively tight policy remains necessary to anchor headline inflation, which has hovered near the 2% target since January 2024 but is projected to average 2.6% this year before easing to 2.3% in 2026; core inflation is expected to stay elevated in coming quarters. GDP grew 0.2 % q/q and 2.4 % y/y in 2025 Q2 on the back of firm household consumption, while unemployment is low and wages rose 6.7 % y/y in Q1 amid persistent labour-market tightness. Risks are tilted to the upside, including sticky services and food prices, a potential acceleration in credit and property-market activity, and expansive fiscal policy, although a stronger koruna could temper price pressures. The board will keep monitoring domestic demand, wage dynamics, exchange-rate movements, global trade tensions and geopolitical developments, and it reaffirmed its readiness to adjust policy as needed to maintain inflation close to the 2 % target.
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.