At its monetary policy meeting on Wednesday, the Czech National Bank did not change interest rates, as expected, for the tenth time in a row. The main interest rate (repo rate), from which loan prices are based, remains at seven percent. The central bank last raised interest rates last June during the “Rusnok era”, when it moved them by 1.25 percentage points to the current level.
Higher interest rates bring more expensive loans for investments and operations to businesses, and more expensive housing loans to households.
Compared to the session at the beginning of August, the central bankers did not prepare any major surprises for the markets. At that time, the CNB announced that it would defend the koruna only if its weak exchange rate threatened price or financial stability. And it was this missing “guarantee” from the central bank that immediately began to be prescribed in the exchange rate of the koruna.
Since the last meeting on August 3, when the CNB announced the formal end of interventions, the koruna has weakened against the euro by less than 50 to the level of 24.43 per euro. During the same period, the domestic currency loses much more significantly against the US dollar, against which it fell by almost six percent to 23.15 CZK per dollar.
Given that the pace of inflation has gradually eased below the nine percent mark in recent months, the debate on the gradual easing of monetary policy is intensifying in the financial markets.
Looking at the weaker numbers from the domestic economy and the drop in inflation, part of the market is convinced that the central bank will come up with the first rate cut this year. After all, according to recent statements, even some members of the bank board did not rule it out.
Note: We will update the text with Governor Aleš Michl’s comments from the press conference, which will start at 3:45 p.m.