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Czech National Bank's Interest Rate Cut Sends Czech Crown to Near Two-Year Low

The Czech National Bank's recent decision to cut the country’s base interest rate by half a percentage point, down to 6.25 percent, has led to a further depreciation of the Czech crown, reaching its weakest level against the euro in almost two years.

This move, driven by declining inflation rates and aimed at stimulating the economy's recovery from a slump, follows a previous interest rate reduction in December. With inflation expected to continue easing, the central bank has hinted at potential further rate cuts in March and May to boost consumer spending and economic activity.

Lower interest rates typically incentivize borrowing, spur spending, and encourage investment in assets like stocks and real estate. The exchange rate for the Czech crown now stands at approximately EUR 1 to CZK 25.18, marking its weakest performance against the euro since early May 2022. This sustained depreciation trend, observed since mid-April 2023, reflects Czechia's economic challenges, high inflation, and waning confidence among foreign investors.


Prepared by the shared office of CzechInvest and CzechTrade in San Francisco.