Czech National Bank raises its two-week repo rate to 4%, its first increase since June

The Czech National Bank raised its two-week repo rate by 0.25 percentage point to 4.00% at its meeting. The Bank Board also lifted the discount rate by the same amount to 3.00% and the Lombard rate to 5.00%, with the new levels taking effect on 6 November 2026.

The move follows a rise in June, when the board raised the two-week repo rate to 3.75%, its first move in 13 months, and it held the rate there in August and September, according to IntelliNews. Governor Aleš Michl was to attend a press conference for accredited journalists at 3 p.m.

INFLATION ABOVE FORECAST

Inflation accelerated to 2.5% year on year in September from 1.9% in August, still inside the tolerance band around the 2% target, but both headline and core inflation have run above the central bank's own forecasts, IntelliNews reported. In August the bank had projected inflation averaging 2.8% in the first quarter of 2027 before slowing, with no further rate rises built into its path.

Deputy Governor Jan Frait had said "arguments for a rate hike make sense", while noting that no decision had been taken and that there were also reasons to hold, and board member Jakub Seidler said he leaned towards a rise in November. The government's draft budget for 2027 adds a 6.8% average rise in public-sector wages and an 11.2% increase in the minimum wage.

FROM JUNE TO NOVEMBER

The Bank Board discusses monetary policy eight times a year. Its statement, released at the press conference after each decision, gives the ratio of votes cast on the interest rate settings.

REGIONAL PEERS

The Czech bank is the only central bank in Central and Eastern Europe that has already answered the energy shock with higher rates, according to ING. Poland's central bank, by contrast, held its main rate at 3.75% on 4 November.

THE TGB VIEW

The Czech move puts the two-week repo rate level with Bank Rate, which the Bank of England raised to 4% at its meeting ending on 4 November, while Norges Bank held at 4.5% and Poland at 3.75%. That makes the Czech bank, already the only central bank in Central and Eastern Europe to have raised rates in response to the energy shock according to ING, a match for the Bank of England rather than its neighbours. The next dates to watch are 25 November, when the board discusses its latest Financial Stability Report, and 17 December, the Czech board's next monetary policy meeting and the date the Bank of England's next Monetary Policy Summary is due.