MNI CNB WATCH: CNB Holds Policy Rate At 3.5% As Expected

Member of the Czech National Bank's Bank Board voted unanimously to keep interest unchanged on Wednesday, with the two-week repo rate at 3.5%, the discount rate at 2.5% and the Lombard rate at 4.50%, but softened its language, with only "relatively" tight monetary policy still needed. (See MNI EM CNB WATCH: Interest Rates Seen On Hold For Rest Of 2025)

Inflation is expected to be slightly above the 2% target until the end of the year, and core inflation to remain elevated for several quarters, the CNB said in a statement, with domestic conditions - including  Q3 GDP growth of  0.7%, equivalent to 2.7% in annual terms - precluding a further cut in interest rates.

"Credit growth is gradually increasing, fostering a rise in the quantity of money in the economy. The labour market remains tight and wages are rising at an elevated pace. At the same time, household demand is gaining strength. Services inflation remains elevated. Rising property prices are also a risk to inflation," the CNB said.

"The Bank Board confirms its determination to continue its monetary policy in order to maintain inflation near the 2% target in the long term. At present, this still requires relatively tight monetary policy."

According to the CNB's newly-released Autumn Forecast, inflation is seen ending 2026 at 2.5%, down from 2.6% in the previous round. At 2.2% the forecast for 2026 is also 0.1 percentage point lower than the Summer Forecast, while 2027's figure was unchanged at 2.5%.

The CNB now sees GDP expanding by 2.3% (+0.3%) in 2025, 2.4% (+0.3%) in 2026 and 2.8% in 2027 (new).