The base interest rate remains at seven percent, despite high inflation

The Czech National Bank (ČNB) decided to maintain the base interest rate at seven percent in its latest monetary policy meeting. Despite high inflation in the country, which reached 15.8 percent year-on-year in December, the central bank has opted not to raise the interest rate. The discount rate and the Lombard rate also remain unchanged at six and eight percent respectively. The CNB statement stated that the bank will continue to prevent excessive fluctuations in the exchange rate of the koruna.

There has been differing opinions on the CNB’s decision, with some analysts like Martin Gürtler of Komerční banka believing the central bank missed an opportunity for another rate hike, while Martin Novák from Broker Consulting sees it as a necessary move to avoid putting unnecessary pressure on the economy.

The CNB meeting was the last for Deputy Governor Mark Mora and board member Oldřich Dědek as their terms expire on February 12 and will be replaced by Jan Procházka and Jan Kubíček. Interest rates on bank deposits and loans are linked to the central bank rates, with higher interest rates leading to higher costs for businesses and households to borrow.

Article by Prague Forum

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