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Czech Republic Monetary Policy June 2020

Czech Republic: CNB stands pat in June

At its 24 June meeting, the board of the Czech National Bank (CNB) unanimously decided to leave the two-week repo rate unchanged at 0.25%, meeting market expectations and following the 75-basis-points cut delivered in the previous May meeting. In addition, the CNB retained the Lombard and discount rate at 1.00% and 0.05%, respectively.

The Bank’s decision was underpinned by recent economic developments coming in line with its May macroeconomic forecast, with GDP contracting 2.0% annually in the first quarter as the Covid-19 pandemic started to take its toll. Although the performance of individual GDP components differed from the CNB’s projections, the headline reading was consistent. On the inflation front, although the readings for April (3.2%) and May (3.4%) overshot the Bank’s forecast, in large part due to higher core inflation, the regulator expects it to decline to its 2.0% goal at the end of the year.

Going forward, it seems like the Bank might stay put given it already delivered a hefty rate cut in its previous meeting; the evolution of the macroeconomic scenario has come in line with its expectations; and its assessment that the risks to the inflation path remain balanced.

The next meeting is scheduled for 6 August.

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