2023.12.2113:17:00UTC+00Czech Central Bank Cuts Interest Rates For First Time In 3-1/2 Years

The Czech National Bank lowered its key interest rate on Thursday for the first time in over three-and-a-half years as inflationary pressures have reduced and the economic activity remains sluggish.

The CNB Bank Board, led by Governor Ales Michl, cut the two-week repo rate by 25 basis points to 6.75 percent, in line with economists' expectations. The previous move in the policy rate was a quarter-point hike in June last year. The latest reduction was the first since May 2020, when the rate was cut by 75 basis points to 0.25 percent, ending a series of rate cuts as the bank tried to underpin the economy in the aftermath of the Covid-19 pandemic. The discount rate was also lowered by 25 basis points to 5.75 percent and the Lombard rate by the same amount to 7.75 percent on Thursday.

Some CNB policymakers had already signaled a possible rate cut in December as they expressed confidence that inflation is set to fall to 3 percent early next year, thus moving closer to the bank's 2 percent target. Headline inflation had peaked at 18 percent in September last year. Price growth was 7.3 percent in November.