The Czech National Bank (CNB) held its two-week repo rate unchanged at 3.50% at its Bank Board meeting on 7 August 2025, the central bank announced after discussing its new summer macroeconomic forecast.
The Summer 2025 Monetary Policy Report contains the CNB's updated projections for the Czech economy. The forecast indicates that monetary policy settings are consistent with a modest decline in short-term rates in the initial phase of the projection horizon, although the Governor said ongoing domestic inflation pressures currently preclude a further decrease in interest rates.
RATE PATH
The CNB began its easing cycle in December 2023 and cut twice more in 2025, in February and May, bringing the rate down from 7% as headline inflation moved closer to its 2% target.
The report encompasses the CNB's projections for GDP growth, inflation, the koruna exchange rate, and wage dynamics. The forecast's reference to a modest initial decline in short-term rates is followed by a slight increase in rates next year.
NO SIGNAL OF FURTHER EASING
The CNB's communication did not signal further easing: the Bank Board assessed the risks to the inflation outlook as inflationary overall. The forecast is consistent with a modest initial decline in short-term market interest rates followed by a slight increase next year, with policy remaining relatively tight to keep inflation close to the 2% target.
The CNB operates under an inflation-targeting framework with a 2% target and a tolerance band. Its rate decisions are transmitted through the banking system principally via the impact on Prague Interbank Offered Rate (PRIBOR) fixings and the deposit and lending rates set by commercial banks.