MNI CNB WATCH: Interest Rates Seen On Hold For Rest Of 2025

The Czech National Bank is expected to leave its policy rate at 3.5% on Thursday, but communications should remain hawkish in light of solid growth, sticky service prices, and strong increases in pay increases and real estate costs together with solid consumer sentiment. (See MNI EM CNB WATCH: 2W Repo Rate Held At 3.5%, Decision Unanimous)

Headline inflation fell by more than expected in September to 2.3%, beating the CNB’s own forecast by 0.3 percentage point, and is likely to continue lower in October. While the central bank expects overall price growth to remain close to recent values for the rest of the year, helped by a pronounced fall in food price inflation, it has said that persistently elevated core inflation means there are still reasons for caution.

Bank Board member Eva Zamrazilova saw no fundamental reason for any change probably until at least the end of the year. After that, she said in a recent interview, “all options are really open,” although further stability is the "preferred scenario."

Wages, which grew at 7.2% in H1 2025 - almost 3% above the CNB’s safe level - remain a key upside risk to the inflation outlook, she added, as do rises in real estate prices, construction and construction materials, “and of course, we keep mentioning the risks arising from the development of public finances."

Fellow board member Jakub Seidler told media that stable rates combined with a relatively stronger koruna “are delivering monetary conditions that are able to finish the disinflation process,” though service sector price dynamics remain a key variable. (See MNI EM INTERVIEW: Czech Nat'l Bank Risks Lagging Prices Bounce)

“In my view, the next move with rates can be a cut or a hike, and I see more or less equal odds for either of those two scenarios,” he said. “But the most likely outlook for me is longer-term stability, which could even last throughout next year.

This week will see the publication of the CNB’s Autumn Forecast, with headline inflation currently 0.3% below the level seen both in November 2024 and the year-end level predicted in last July’s summer edition. 

Headline inflation in 2026 was seen at 2.2% last November, rising to 2.3% in the most recent Summer Forecast, with 2027’s figure increasing to 2.9% on the back of strengthening GDP growth.