- Decision
- Maintain
- Rate change
- 0 bps
- two-week repo rate
- 3.75%
The Czech National Bank’s Bank Board unanimously held the two-week repo rate at 3.75%, judging that the June increase and higher longer-term interest rates had sufficiently tightened monetary and financial conditions, while core inflation remained elevated and risks were inflationary overall. After holding the rate at 3.50% from September 2025 through May 2026, the Board raised it by 25 basis points in June and held it in August. Inflation remains close to the 2% target but is forecast to increase temporarily in late 2026 and early 2027, with persistent services inflation, rapid wage growth and elevated credit and property-price growth maintaining domestic price pressures. Year-on-year gross domestic product growth slowed to 1.9% in the second quarter from 2.2%, with domestic demand remaining the main source of growth. Commodity-market developments and the Middle East conflict pose upside risks, while weak performance in some euro-area economies, a possible global asset-price correction and trade barriers could weigh on activity or inflation. The Board said relatively tight policy remains necessary and signalled that its next decision will be between holding rates and raising them.
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.