MNI CNB WATCH: Unanimous Support For Rate Hold At 3.5%

The Czech National Bank left interest rates unchanged on Thursday, saying "relatively tight" monetary policy was still needed even as it expects inflation below the 2% target throughout 2026 and close to target in 2027.

Credit growth, which it described as "elevated" in December, is accelerating "gradually", the CNB said in a statement, while the labour market remains tight and wages continue to increase at an elevated pace. Rising household consumption, still-elevated services inflation and property price growth are having an inflationary effect, but the CNB cut its inflation forecast for this year to 1.6%, from 2.2% in October, and for next year, to 2.1% from a previous 2.5%.

The Bank Board repeated assertions that a "possible acceleration in the growth of the money supply in the economy caused by lending to households and general government is an upside risk to inflation," and that "potential additional growth in total public sector spending would lead to a risk of fiscal policy having an even greater inflationary effect." 

Overall, however, risks to the inflation outlook are still seen balanced overall. Thursday's unanimous decision aims to keep headline inflation stabilised close to target even after the "temporary factors" lowering it - principally the transfer of the renewable energy sources fee to the state budget - dissipate, the Bank said. (See MNI EM INTERVIEW2: CNB Should Ignore Brief Inflation Dip - Holub)

It left the two-week repo rate at 3.5%, the Lombard rate at 4.5%, and the discount rate at 2.5%. (See MNI EM CNB WATCH: Hold Seen, But Outlook May Put Cut In Frame)

At 2.6%, the Czech economy grew by 0.3 percentage point more in 2025 than seen in the autumn. The CNB boosted its growth forecasts for this year by 0.5 percentage point to 2.9%, and for next year by 0.1pp, also to 2.9%. It expected the koruna at 24.4-24.5 to the euro over the forecast horizon, having averaged 24.7 in 2025.

The Monetary Policy Report – Winter 2026, will be published on Feb 13.