- Decision
- Raise
- Rate change
- 25 bps
- two-week repo rate
- 3.75%
The Czech National Bank raised its two-week repo rate by 0.25 percentage point to 3.75%, with six board members backing the move and one preferring no change, saying tighter policy was needed to contain still-elevated core inflation and keep headline inflation close to the 2% target over the monetary policy horizon despite weaker expected growth this year than in the May forecast. It also increased its other key interest rates by the same amount. Inflation has been near target since January 2024, but the Monetary Department’s updated forecast sees a risk of a slight temporary pickup in late 2026 and early 2027, while core inflation has stayed just below 3% for six months without declining; GDP growth slowed to 2.2% in 2026 Q1, and the board cited accelerating credit growth, a tight labour market, rapid wage growth and still-elevated property price growth as domestic inflation pressures. Foreign trade acted against growth, and the board said future rate decisions would also depend in part on koruna exchange rate developments and fiscal policy’s effect on the economy. It added that, despite the de-escalation of the Middle East conflict, it would keep watching geopolitical events, key foreign central bank actions, financial markets, trade relations, weak activity in some euro area economies and the war in Ukraine. The board assessed risks to the inflation outlook as overall inflationary and said it would consider any further moves very carefully based on incoming data and the persistence of the low-inflation environment.
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.