Czech Republic Monetary Policy

Czech Republic

Central Bank cuts interest rates to new record low

At its 28 June meeting, the Czech National Bank cut the two-week repurchase rate by 25 basis points to 0.50%, in a move expected by the market. With this move, monetary authorities have cut the main monetary policy rate to a new record low, after officials last slashed the main monetary policy rate from 1.00% to 0.75% in May 2010. At the current level, the two-week repurchase rate is now 25 basis points below the European Central Bank's main policy rate. In addition, the Lombard rate, which is a ceiling for short-term interest rates, was also cut by 25 basis points to 1.50%. Finally, the Bank left the discount rate unchanged at 0.25%. In its statement, the Central Bank argued that, under its baseline scenario, inflation will remain elevated as a result of the January VAT increase, but will be back below the Bank's 2.0% inflation target next year. However, monetary authorities acknowledged that the alternative scenario

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Note: 2-week repo rate in %.
Source: Czech National Bank (CNB).

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