Czech National Bank

William Malcolm

CNB Holds Interest Rates Steady

The Board of the Czech National Bank voted unanimously to hold interest rates. The primary interest rate on which the interest rate on commercial loans is derived remains at 0.25 percent. The Governor of the CNB, Jiří Rusnok, stated that, given the current situation, the urgency of considerations of a possible further increase in interest rates increased compared to November. According to analysts, rates will remain unchanged in the first half of next year.

According to Rusnok, most board members assessed the situation in the same way as in November. “So we will consider the time when it will be time to move interest rates. We would not want to jeopardize the consolidation of the economy by any premature tightening of monetary conditions,” he said.

Rusnok also informed today that, according to the council, the risks regarding the economy’s further estimated development are still very significant. These include, for example, a loose fiscal policy in the coming years, a possible worsening of the second wave of the pandemic, Britain’s exit from the EU without an agreement, or the composition of factors behind inflation in the Czech Republic and abroad. The governor reiterated that the economy’s performance would not reach the pre-crisis level even by the end of 2022.

In the current CNB forecast, the economy expects the economy to decline by 7.2 percent this year and grow by 1.7 percent next year. In 2022, according to the CNB, the economy should grow by 4.2 percent.

Today, the Governor of the CNB commented on a possible provisional budget provision. According to him, a temporary provision in the order of days to several months does not mean an immediate threat to the economy’s functioning. However, this is not a good signal in terms of the stability and predictability of the Czech Republic situation. The Ministry of Finance announced today that it had begun preparations for the provisional.