Minutes of the Bank Board meeting on 6 November 2025
Present at the meeting: Aleš Michl, Eva Zamrazilová, Jan Frait, Karina Kubelková, Jan Kubíček, Jan Procházka, Jakub Seidler.
The meeting opened with a presentation of the seventh situation report and the new macroeconomic forecast. According to this forecast, inflation would be close to the 2% target until the end of next year. Consistent with the baseline scenario of the forecast was broad stability of short-term market interest rates over the next few quarters.
The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as inflationary overall. In the general assessment of the risks, there was a consensus that there were both upside and downside risks – those from the domestic economy being mostly inflationary and those from the external environment largely anti-inflationary. Aleš Michl opened the meeting by saying that the current situation still required relatively tight monetary policy, so he was inclined to leave interest rates unchanged.
Part of the Board’s discussion was devoted to domestic price and wage growth. Jan Procházka said that in his view, the observed evolution of core inflation and wages largely reflected structural changes in the economy, which would need closer attention. Jakub Seidler agreed that the elevated services inflation was due not only to cyclical factors, but also to structural changes, as the share of services in household consumption had long been rising, a fact also noted by Eva Zamrazilová. Jakub Seidler added that 2% services inflation is not the CNB’s objective, as higher growth in services prices than goods prices is only natural in a converging economy. That said, he regarded services inflation of more than 4% as higher than desirable. Jan Frait also said that the current growth in services prices was still above the level compatible with the 2% inflation target. In his opinion, it strongly reflected the labour market situation and the resulting relatively rapid growth in nominal wages. For the time being, he did not see too many factors that could lead to a sharper slowdown in wage growth. Eva Zamrazilová pointed out that median services inflation was currently twice as high as in the ten years leading up to Covid and that, coupled with lower variability, this indicated that inflation pressures in the area of services were anchored relatively firmly. Karina Kubelková mentioned that the rising wages and demand were reflected in services prices and inflation persistence, but inflation itself was not on an upward trend. However, if wage growth continued to surprise to the upside, services inflation could stay higher for longer.
In connection with the flash inflation estimate for October, several of the board members said food prices had recently become more volatile and their short-term swings should be taken with a pinch of salt. Jan Frait added that monetary policy decision-making should also not put too much emphasis on administrative factors such as the ETS 2 and changes to various fees temporarily affecting the inflation metrics. In his view, the labour market was the key factor at the moment.
House price growth was repeatedly identified as a significant inflationary factor. Jan Kubíček and Jan Procházka said it would be necessary to monitor whether and when the expected turnaround in house prices actually occurs and their growth starts to slow. Jan Kubíček added that the forecast nonetheless contained high property price growth, so that growth was already reflected in the interest rate projection. Eva Zamrazilová said that even if house price growth slowed sharply, which was not very likely, imputed rent would probably continue to rise rapidly due to growth in prices of building work and materials. Jakub Seidler also drew attention to the risk arising from a potential shortage of building materials and a rise in their prices.
In a discussion of the real economy, there was a consensus regarding solid growth in household consumption. By contrast, Jan Kubíček, Jan Procházka and Jakub Seidler identified potential worse performance of industry as a downside risk to growth. Concerning the flash GDP growth estimate for Q3, Jan Kubíček said he did not assign a major weight to the estimate for now, as it did not correspond particularly well with other economic data and its structure was not yet known. Karina Kubelková also said that without details on the structure of the growth, it was not possible to make a qualified assessment of the performance of the economy in Q3.
Fiscal policy was repeatedly mentioned as an upside risk to inflation. However, there was a consensus that the form of specific future fiscal policy actions was currently subject to considerable uncertainty, so it was difficult to assess the future effect of fiscal policy at present. Eva Zamrazilová pointed to the need to differentiate between the primary anti-inflationary effect of some of the administrative measures currently under discussion and their secondary impact, which could conversely be inflationary. Karina Kubelková and Jan Kubíček agreed, adding that the time scale over which these effects would materialise would also differ.
The board members went on to discuss the external environment and its effect on the domestic economy. Jan Frait described the overall inflation environment in the euro area as subdued and expressed the view that there were still conditions for disinflation pressures to arrive in the Czech Republic from China. He also saw some early signs of financial distress abroad, which would also likely have an anti-inflationary effect if it were to spread. Jan Procházka saw the uncertainty surrounding tariffs, the overall global economic situation and the automotive sector as a negative risk for the domestic economy. Karina Kubelková said that numerous uncertainties linked with the geopolitical situation persisted. She also said that the effect of the German fiscal package on the economies of that country and its neighbours would probably be insignificant. Jan Kubíček noted that the onset of German fiscal easing was likely to be slower than he had previously expected. Jakub Seidler also mentioned the risk of weaker performance of the German economy. As for the global economy, he added that even though the impacts of the trade wars had so far been limited, they still might materialise more strongly later on. Eva Zamrazilová noted that the domestic economy was probably less dependent on the German one than in the past, so she did not regard possible continued weak performance of Germany as a significant downside risk to inflation.
In a discussion of monetary conditions, Jan Frait said that in his view, monetary policy was not currently having a restrictive effect on the economy and was now broadly neutral. Jakub Seidler agreed that interest rates were probably no longer very restrictive. In combination with the stronger koruna, however, the overall monetary conditions remained modestly restrictive in his view. This was desirable for completing the disinflation process. Jan Kubíček said that, in addition to the koruna exchange rate, longer interest rates were contributing to modest restriction of monetary conditions. Their recent growth had delivered a certain autonomous tightening of monetary conditions. On the other hand, he noted that the koruna’s anti-inflationary appreciation trend had halted for now.
As for the monetary policy decision, Eva Zamrazilová said that leaving interest rates unchanged at this meeting entailed a minimal risk of monetary policy error. Karina Kubelková and Jan Procházka agreed. Jan Procházka added that keeping rates at the current level would provide a sufficient degree of restriction to offset the upside risks to inflation. As regards monetary policy going forward, Jakub Seidler emphasised the importance of being prepared to respond flexibly to further economic developments given the existence of both upside and downside risks. Karina Kubelková also noted that in a situation of great uncertainty, the balance of risks could be tilted very quickly and easily one way or the other, and the CNB should be prepared to respond flexibly on either side to any materialising risks.
At its meeting, the Bank Board kept interest rates unchanged. The two-week repo rate thus remains at 3.50%, the discount rate at 2.50% and the Lombard rate at 4.50%. All seven members voted in favour of this decision.
Author of the minutes: Vojtěch Molnár, Monetary Department