On Wednesday, 20 March, the Czech National Bank's Bank Board cut the base interest rate by half a percentage point, as it had done the previous month, this time to 5.75 %. Interest rates on bank deposits and loans are based on central bank rates: lower interest rates bring cheaper loans for investment and business operations and cheaper mortgages for households. However, higher interest rates increase the appreciation of deposits in accounts.

Thanks to the reduction, interest rates on mortgages and corporate loans can fall. The Bank Board's decision should not have a significant impact on the koruna's exchange rate, as the market and analysts had expected it, said Jakub Seidler, chief economist at the Czech Banking Association. The CZK 25.40/€ threshold is stable, according to Matěj Novák, a member of the board of directors of the Czech Fintech Association.

The last time the interest rate was this low was in May 2022, almost two years ago. Analysts expect that the pace of the reduction will not slow down; on the contrary, two of the seven board members voted for acceleration. The CNB Board also cut the Discount rate (to 4.75 per cent) and the Lombard rate (to 6.75 per cent) by the same amount. According to CNB Governor Ales Michl, one of the risks to future price growth acceleration in the Czech Republic is higher service inflation. He also cited a rapid recovery in the credit and mortgage markets or excessive wage demands as risks.