Czech Republic Interest Rate

CNB hikes rates for first time in four years in June

June marks first increase since 2022: At its 18 June meeting, the Czech National Bank (CNB) raised its two-week repo rate by 25 basis points to 3.75%, marking its first rate hike since June 2022. Six of the seven Board members voted in favor of the decision, which was widely expected by markets.

Domestic price pressures drive hike: The decision was driven primarily by domestic inflationary pressures amid elevated core inflation, strong wage growth, robust credit expansion, resilient domestic demand, rising money supply and an expansionary fiscal stance. The impact of the Iran conflict and higher energy prices was viewed as an additional inflationary risk rather than the primary reason for the hike.

Rates seen ending 2026 near current levels: The CNB stressed that future decisions will remain data-dependent. Our Consensus is for rates to end the year near current levels. The Bank will reconvene on 6 August.

Panelist insight: ING’s David Havrlan and Frantisek Taborsky commented on the outlook: “Our baseline is that the CNB is now done, but the bar for another hike appears relatively low. Core inflation in June and July will probably be decisive for further policy decisions and for markets, even as headline inflation is expected to fall below 2% in June.” Erste Bank’s Jiri Polansky said: “In June, the CNB raised interest rates and will likely consider one further move for the remainder of the year. We see the probability of both options, holding rates stable and one additional hike, as broadly similar, with a slight tilt towards stability. A moderate rate cut could occur next year if expectations of a gradual easing in domestic inflationary pressures materialize.”

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 25 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.

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