Czech Central Bank Lowers Rates For Third Time

(RTTNews) - The Czech National Bank on Wednesday cut the key interest for a third policy session in a row as inflation has returned to the 2 percent target, but the central bank stuck to a cautious stance saying policy is set to remain tight in the near term due to modest inflationary risks.

The CNB Bank Board, led by Governor Ales Michl, decided 5-2 vote to cut the two-week repo rate by 0.5 percentage point to 5.75 percent. The reduction was in line with expectations.

The previous move was a similar size reduction in February.

The latest decision was underpinned by the February winter macroeconomic forecast and by an assessment of information obtained since it was prepared, the bank said.

Materialization of risks would mean that inflation would diverge from the target towards the upper boundary of the tolerance band in the quarters ahead, the bank noted.

"Therefore, the Bank Board considers it necessary to persist with tight monetary policy and continue to approach further rate cuts with caution," the CNB reiterated.

The bank also lowered the discount rate by 50 basis points to 4.75 percent and the Lombard rate by the same amount to 6.75 percent.

The fight against inflation is not over though rates have been lowered gradually since December 2023, the bank said.

Interest rates remain significantly positive in real terms and are dampening inflation, the central bank added.