In a meeting last week, the Czech National Bank (CNB) Bank Board decided to stay on course and keep interest rates high. The two-week repo rate of 7%, the discount rate of 6% and the Lombard rate of 8% have been at their current level since June 2022. The September decision is based on the latest macroeconomic forecast from August of this year.
CNB explains that these interest rates are appropriate in order for inflation to meet its target in the upcoming year. These measures have already significantly lowered the volume of CZK bank loans to households and firms and therefore the quantity of money in the economy, but rising government lending is having the opposite effect. However, CNB claims that “in the first half of 2024, we expect inflation to be close to the 2% target”. When asked about possible future monetary policy easing however, the board members refuse to make any predictions, reasoning that all decisions will be made with newest data in mind.
Prepared by the Czech Trade United Kingdom & Ireland team
Source: Czech National Bank