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.

Inflation has been close to the 2% target since January 2024. According to the Monetary Department’s new forecast, inflation will remain slightly above 2% until the end of next year. However, core inflation will remain elevated in the quarters ahead. The ongoing inflation pressures from the domestic economy currently preclude a further decrease in interest rates.

Given the current and expected developments, relatively tight monetary policy is still needed. Credit growth is gradually increasing, fostering a rise in the quantity of money in the economy. The labour market remains tight and wages are rising at an elevated pace. At the same time, household demand is gaining strength. Services inflation remains elevated. Rising property prices are also a risk to inflation.

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 countries. 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

The Czech economy continues to grow at a solid pace this year. According to the CZSO’s flash estimate, GDP rose by 0.7% quarter on quarter and by 2.7% year on year in 2025 Q3, the highest figure in the last three years.

Domestic economic growth is still being driven mainly by household consumption. Unemployment remains low. Wages rose by 7.8% year on year in 2025 Q2. Above-average wage growth is contributing to increased inflationary pressures from the domestic economy. These are reflected mainly in persistently elevated services inflation and above-average growth in property prices.

Outlook

According to the Monetary Department’s forecast, inflation will be slightly above 2% for the rest of this year. Inflation is thus forecasted to reach 2.5% on average this year and decrease to 2.2% on average next year, which would be the lowest level in eight years.

According to the Monetary Department’s forecast, Czech GDP will grow by 2.3% this year and accelerate to 2.4% and 2.8% in the subsequent two years.

Risks and uncertainties

The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as inflationary overall. A possible acceleration in the growth of the money supply in the economy caused by lending to households and general government is an upside risk to inflation. 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 inflationary risk. The risk of inertia in elevated services inflation, including imputed rent, and food inflation persists. By contrast, a stronger koruna exchange rate could have an anti-inflationary effect. Increasing barriers to international trade are a downside risk to global economic activity. The weak performance of some euro area economies is an anti-inflationary risk. In the case of the German economy, this risk is only partly offset by the planned fiscal stimulus. The development of the war in Ukraine still represents an uncertainty. Rising general government debt in some developed countries and increasing sensitivity of financial markets to sovereign risk are becoming a major source of 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.