Czech National Bank fights accelerating inflation with high-interest rates

Published: 16.11.2021 Related countries:  Israel Israel

The Czech Central Bank has raised interest rates by the most significant amount in 24 years.

The Czech Republic faces above-average inflation rates in the second half of 2021. In October 2021, consumer prices increased by 5.8% year on year. Moreover, the Czech National Bank expects that the peak of inflationary pressures is yet to come, at the beginning of 2022, when inflation may reach up to 7%. The Czech National Bank wants to mitigate inflation stemming from domestic as well as foreign sources using high-interest rates. Thus, the central bank has raised the base rate, through which it influences the interest rates of commercial banks, by 1.25 percentage points to 2.75 %. This is the steepest rate increase in the Czech Republic since 1997. High-interest rates make all loans more expensive and therefore increase the additional cost of debt service, which harms business.

Source: ČIA NEWS
Prepared by the the team of CzechTrade/Czech Invest office in Israel.