Statement of the Bank Board for the press conference following the monetary policy meeting
Decision
At its meeting today, the Bank Board kept interest rates unchanged. The two-week repo rate thus remains at 3.5%. All seven members voted in favour of this decision.
Today’s decision reflects the updated inflation outlook and its risks and an assessment of new data. According to the Monetary Department’s updated forecast, inflation will be above 2% for the rest of this year. Core inflation will remain elevated over the entire forecast horizon. The ongoing inflation pressures from the domestic economy currently preclude a further decrease in interest rates.
In particular, growth in services prices remains elevated, reflecting past cost shocks, current swift wage growth in this sector and rising household demand. In addition, however, the contribution of property prices to inflation is increasing due to the continued property market recovery. The current interest rate level is still preventing a sharper increase in lending in this segment. However, the evolution of services prices and property prices, coupled with relatively fast wage growth, is the main factor leading the Bank Board to be cautious about easing monetary policy further.
Today’s decision aims to stabilise headline inflation close to the 2% inflation target in the long run. This requires growth in the quantity of money in the economy not to accelerate excessively and credit growth to remain moderate. By ensuring this, monetary policy will help keep inflation low.
At its meetings ahead, the Bank Board will base its decisions on an assessment of newly available data and their implications for the inflation outlook. Its considerations about the interest rate settings will depend mainly on an evaluation of the persistence of the low-inflation environment, koruna exchange rate developments, the effect of fiscal policy on the economy, an analysis of the tightness in the labour market, and changes in domestic and external demand. The Bank Board will also monitor the actions of key foreign central banks, geopolitical events and developments in trade relations between the USA and the EU. It will also assess the transmission of previous interest rate cuts to lending activity, asset prices – above all property prices – and subsequently real economic activity and prices.
The Bank Board confirms its determination to continue its monetary policy in order to maintain inflation near the 2% target in the long term. At present, this still requires relatively tight monetary policy.
Economic developments
GDP rose by 2.2% year on year in 2025 Q1. The growth was driven by household consumption. Average wage growth stood at 6.7% year on year in 2025 Q1, remaining elevated from a historical perspective. External demand remains weak, mainly due to the decline in European industry.
Risks and uncertainties
The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as inflationary overall. As regards domestic inflationary risks, the risk of inertia in services inflation, including imputed rent, and in food inflation persists. A potential acceleration of money creation in the economy stemming from a further stronger recovery in lending activity, especially on the property market, is also an inflationary risk. Potential additional growth in total public sector spending would lead to a risk of fiscal policy having an even greater inflationary effect. Continued rapid wage growth related to persistent tightness in the labour market is an additional inflationary risk. Wage growth would thus continue to exceed productivity growth. Increasing barriers to international trade are a downside risk to global economic activity. However, the impact on inflation is not clear cut, especially in the longer term. The risk of markedly weaker German economic output is partly offset by the planned fiscal stimulus of the new German government. The development of the war in Ukraine and the Middle East represents an uncertainty.
Statutory mandate
The Bank Board assures the public that the CNB’s actions will be sufficient to maintain price stability in accordance with its statutory mandate. In addition, the Bank Board is ready to react appropriately to any materialisation of the risks of the outlook for the fulfilment of the inflation target.