- 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 3.50 per cent on 6 November, with all seven board members voting for the hold, arguing that headline inflation has hovered near the 2 per cent target since January 2024 but domestic demand, rapid wage gains and elevated services and property-price inflation continue to generate upside pressures that rule out further easing. After cutting the repo rate by 25 bp in February and another 25 bp in May—taking the cumulative reduction since December 2023’s 7 per cent peak to 350 bp—the CNB has now held steady for four consecutive meetings. The statement contains no operational changes beyond confirming that monetary conditions will remain “relatively tight” to keep money and credit growth moderate. September quarter GDP expanded by 0.7 per cent q/q and 2.7 per cent y/y, driven by household consumption amid low unemployment and 7.8 per cent y/y wage growth; inflation is projected to average 2.5 per cent in 2025 and ease to 2.2 per cent in 2026, with core inflation seen staying elevated for several quarters. A firmer koruna is identified as a potential disinflationary offset, while global risks stem from trade barriers, weak euro-area performance and geopolitical tensions. The board reiterates that maintaining inflation near target “still requires” tight policy and will calibrate future moves based on incoming data, exchange-rate dynamics, fiscal stance, labour-market tightness and external developments.
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.