2-Week Repo Rate in Czech Republic
The 2-Week Repo Rate ended 2022 at 7.00%, up from the 3.75% end-2021 value and significantly higher than the 0.05% rate a decade earlier. For reference, the average 2-Week Repo Rate in Eastern Europe was 8.40% at the end of 2022. For more interest rate information, visit our dedicated page.
Czech Republic Interest Rate Chart
Czech Republic Interest Rate Data
2019 | 2020 | 2021 | 2022 | 2023 | |
---|---|---|---|---|---|
2-Week Repo Rate (%, eop) | 2.00 | 0.25 | 3.75 | 7.00 | 6.75 |
3-Month PRIBOR (%, eop) | 2.18 | 0.36 | 4.08 | 7.26 | 6.77 |
10-Year Bond Yield (%, eop) | 1.63 | 1.28 | 2.73 | 5.02 | 3.75 |
Central Bank cuts rates further in September
25 basis point reduction meets market expectations: At its meeting on 25 September, the Czech National Bank (CNB) lowered the 2-week repo rate by 25 basis points to 4.25%. Moreover, the CNB lowered the discount and Lombard rates by the same amount to 3.25% and 5.25%, respectively. The move, which followed August’s same-sized reduction, had been priced in by markets but was not unanimous, as one member of the Bank’s board voted for a 50 basis point cut.
Sluggish economy, upside inflation risks motivate the cautious cut: The Bank noted that even though inflation has remained close to the 2.0% target since the beginning of the year, it will likely approach the upper bound of the 1.0–3.0% tolerance range in subsequent quarters, necessitating an extended period of tight monetary policy and only cautious rate cuts. Risks to the inflation outlook were seen by the Bank as predominantly skewed to the upside and include rising wage growth, potentially excessive public spending growth, higher-for-longer services inflation, and surging lending activity—particularly in the property market. With regards to economic activity, the CNB noted that the economic recovery has been slow and that growth remains below potential, adding impetus to continue cutting rates.
Policy rates to edge down further this year: The Bank stated that it could stop reducing interest rates ahead, either temporarily or for the foreseeable future, suggesting a cautious approach to future rate adjustments. That said, our Consensus is for the 2-week repo rate to end the year about 25 basis points lower than September’s level, though a significant amount of panelists see up to 50 basis points of additional rate cuts. Higher-than-expected inflation poses an upside risk, while weaker-than-anticipated activity in key trading partner Germany is a downside risk to both inflation and the policy rate.
Panelist insight: ING analysts David Havrlant and Frantisek Taborsky commented on the outlook: “We maintain our view of another 25bp rate cut in November, followed by a pause in December. The December pause-or-not-to-pause dilemma must be perceived as a close call, given that any forward guidance is absent. […] The easing cycle could carry on in early spring, bringing the rate to 3.25% by mid-next year, unless there are upward surprises in January's core inflation, such as a spike in the market and imputed rents, reflecting the renewed growth in residential property prices.”
How should you choose a forecaster if some are too optimistic while others are too pessimistic? FocusEconomics collects Czech interest rate projections for the next ten years from a panel of 23 analysts at the leading national, regional and global forecast institutions. These projections are then validated by our in-house team of economists and data analysts and averaged to provide one Consensus Forecast you can rely on for each indicator. By averaging all forecasts, upside and downside forecasting errors tend to cancel each other out, leading to the most reliable interest rate forecast available for Czech interest rate.
Download one of our sample reports to visualize what a Consensus Forecast is and see our Czech interest rate projections.
Want to get access to the full dataset of Czech interest rate forecasts? Send an email to info@focus-economics.com.
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