Czech Republic Monetary Policy

Czech Republic

Central Bank pauses easing cycle after June rate cut

At its 2 August monetary policy meeting, the Czech National Bank maintained the two-week repurchase rate at a record-low of 0.50%, in a decision broadly expected by the market. The move follows the Bank's decision to cut the main monetary policy rate by 25 basis points in June. At the current level, the two-week repurchase rate is 25 basis points below the European Central Bank's main policy rate. Monetary authorities underlined that, on the monetary policy horizon, inflation will hover slightly above the Bank's inflation target due to tax changes aimed at curbing the fiscal deficit. In addition to tax changes, monetary officials explained that commodity prices and a weaker koruna also remain sources of inflation. Authorities acknowledged that the economy will contract 0.9% this year as a result of a marked slowdown in external demand and that growth in domestic demand will be anaemic on the back of fiscal consolidation. The next monetary policy meeting is scheduled for 27 September.

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