At its meeting today, the Banking Council of the Czech National Bank decided to reduce interest rates by 0.5 percentage points to 5.25 percent starting on May 3. It is the lowest since May 2022. All seven members of the bank board voted for this decision.
The discount rate decreased in the same range to 4.25 percent and the Lombard rate to 6.25 percent.
On the one hand, commercial banks’ interest on savings accounts and term deposits, and on the other hand, interest on mortgages and other loans indirectly depend on the base rates of the CNB.
There was speculation among analysts that the bank would cut key rates by 0.25 or 0.50 percentage points. “Czech consumer inflation, which in the past two months reached the central bank’s two percent target, spoke in favor of a bolder approach, which would entitle the CNB to steeper rate cuts,” says Cyrrus economist Vít Hradil.
According to Generali Investments economist Radomír Jáč, it can be assumed that the CNB will reduce interest rates at the next meetings as well, which will lead to a decrease in domestic banks’ interest rates – both on deposits and loans.
“The softening of monetary conditions through the drop in interest rates will thus be an impetus for higher borrowing and revival of domestic demand in the Czech economy. However, it is always necessary to keep in mind that the change in the interest rates of the central bank will be fully reflected in the economy with a delay of several calendar quarters, by default we talk regarding four to six calendar quarters,” explains Jáč.
According to him, the reduction of interest rates, which the CNB started at the beginning of this year, will be fully reflected in the Czech economy only starting from the first quarter of 2025.
Under the leadership of Jiří Rusnok, the bank board increased interest rates nine times in a row in the fight once morest rapidly rising inflation. As recently as June 2021, the two-week repo rate was 0.25%, rising to 7% by June 2022. The new council led by Aleš Michl kept it there until December 21, 2023, when it decided to reduce it to 6.75%. In February, the rate fell by another 0.5 percentage points and in March by the same amount.
CNB two-week repo rate
from%3. 5. 2024 5,25 21. 3. 20245,759. 2. 20246,2522. 12. 20236,7523. 6. 202276. 5. 20225,751. 4. 202254. 2. 20224,523. 12. 20213,755. 11. 20212,751. 10. 20211,56. 8. 20210,7524. 6. 20210,511. 5. 20200,2527. 3. 2020117. 3. 20201,757. 2. 20202,253. 5. 201922. 11. 20181,7527. 9. 20181,53. 8. 20181,2528. 6. 201812. 2. 20180,753. 11. 20170,54. 8. 20170,252. 11. 20120,051. 10. 20120,2529. 6. 20120,57. 5. 20100,7517. 12. 200917. 8. 20091,2511. 5. 20091,56. 2. 20091,7518. 12. 20082,257. 11. 20082,758. 8. 20083,58. 2. 20083,7530. 11. 20073,531. 8. 20073,2527. 7. 200731. 6. 20072,7529. 9. 20062,528. 7. 20062,2531. 10. 2005229. 4. 20051,751. 4. 2005228. 1. 20052,2527. 8. 20042,525. 6. 20042,251. 8. 2003226. 6. 20032,2531. 1. 20032,51. 11. 20022,7526. 7. 2002326. 4. 20023,751. 2. 20024,2522. 1. 20024,530. 11. 20014,7527. 7. 20015,2523. 2. 2001526. 11. 19995,2527. 10. 19995,55. 10. 19995,753. 9. 1999630. 7. 19996,2525. 6. 19996,54. 5. 19996,99. 4. 19997,212. 3. 19997,529. 1. 1999818. 1. 19998,7523. 12. 19989,54. 12. 199810,513. 11. 199811,527. 10. 199812,525. 9. 199813,514. 8. 19981417. 7. 199814,520. 3. 19981517. 12. 199714,7510. 12. 1997159. 12. 199715,54. 12. 199716,753. 12. 199717,52. 12. 1997181. 12. 199718,531. 10. 199714,84. 8. 199714,51. 8. 199714,728. 7. 199714,924. 7. 199715,223. 7. 199715,422. 7. 199715,716. 7. 1997169. 7. 199716,28. 7. 199716,57. 7. 1997171. 7. 199717,930. 6. 199718,224. 6. 199718,523. 6. 19972020. 6. 19972218. 6. 19972511. 6. 1997294. 6. 19973921. 6. 199612,49. 5. 199611,829. 4. 199611,629. 3. 199611,58. 12. 199511,3Zdroj: ČNB
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