Czech National Bank

William Malcolm

CNB Holds Key Rate Warns Of Slow Recovery

The Czech National Bank kept interest rates unchanged Thursday. The main interest rate, on which the interest rate on commercial loans is based, thus remains at 0.25 percent. According to CNB Governor Jiří Rusnok, a change in the CNB’s interest rates is unlikely by the end of the year.

“I do not think that anything extraordinary will happen that would require our response … We are not facing any acute need to change our monetary policy,” Rusnok told a news conference after the board meeting.

At the same time, the CNB published a new macroeconomic forecast, in which it worsened the estimate of the development of the Czech economy this year and next. Newly, the economy is expected to decline by 8.2 percent this year and grow by 3.5 percent next year. “The performance of the economy will not reach the pre-pandemic level until the end of 2022,” Rusnok said. According to him, economic recovery will not be easy.

Economists also expect the CNB’s interest rates to remain unchanged for an extended time. The new forecast published by the CNB is consistent with the stability of domestic market interest rates until the middle of next year and then their gradual rise.

Interest on bank deposits and loans is derived from central bank rates. Businesses have higher interest rates on investment and operating loans, and more expensive housing loans on households.