Minutes of the Bank Board meeting on 5 February 2026
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 first situation report and the new macroeconomic forecast. According to this forecast, inflation would be below 2% this year and return very close to the inflation target at the start of 2027. Consistent with the baseline scenario of the forecast was broad stability of short-term market interest rates in the first half of this year, followed by a slight increase in rates.
The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as balanced overall. According to Aleš Michl, all options regarding the path of rates were still open going forward. The aim was to keep inflation low in the long term and to remain hawks combating inflation.
In a debate on the monetary policy stance, the effect of administrative price changes arising from the transfer of the renewable energy sources fee to the state budget was discussed. This transfer would reduce headline inflation below the inflation target this year. The Board agreed that this was a one-off factor and that monetary policy should not react to its first-round effects. According to Eva Zamrazilová, the effect of these regulatory interventions would fade out over a period of one year, and they did not imply a decrease in the demand-pull inflationary pressures in the economy. Jakub Seidler said that inflation being below the 2% target due to administrative effects did little to alter previous considerations regarding the monetary policy stance. However, he added that even these administrative factors could gradually give rise to anti-inflationary second-round effects, acting through lower inflation expectations, a more muted impact of indexation in contracts and more moderate wage bargaining. Equally, though, he said that the related inflationary factor of an increase in households’ disposable income should not be overlooked. Eva Zamrazilová also drew attention to this.
Other monetary policy issues were also discussed. According to Jan Frait, it would make sense at the moment to increase the slope of the yield curve slightly by moving the short end of the curve downwards moderately. In the circumstances, longer rates would stay at relatively high levels, and a slight decline in short rates would not lead to growth in lending. Jan Kubíček said that although M3 growth was below average at present, the overall credit aggregates – including bonds issued – were rising at a brisk pace. At the same time, households’ demand for assets such as property remained strong. These mixed trends therefore indicated that the CNB’s interest rates were not too high and were having neither an expansionary nor a restrictive effect. In his opinion, however, public finances would act in a moderately expansionary direction. Karina Kubelková said that tight monetary policy made sense in the current situation, at least until the data showed that fundamental domestic inflationary pressures were diminishing. According to Jan Procházka, the CNB was now in a good position and there could be room to cut rates moderately as some of the inflationary risks subsided.
As regards prices, core inflation and prices of services were the main topics discussed. Jan Kubíček said that core inflation continued to fluctuate below 3%. The decrease in core inflation in November had not been the beginning of a clear completion of the disinflation process, as the momentums of core inflation had conversely accelerated in December. Karina Kubelková did not yet see any positive change in inflation in either the service sector or the housing area, and in her opinion core inflation remained elevated. Jakub Seidler pointed to the fact that the disinflation trend in services had been fairly weak last year and had halted to some extent in the second half of the year. The persistence of core prices was also evidenced by the fact that a substantial slowdown in core inflation during 2025 had been expected at the end of 2024 but had ultimately failed to materialise. In his view, food prices could contribute in an anti-inflationary manner this year and had the potential to affect inflation expectations. However, these were volatile consumer basket items that could change direction abruptly.
Economic activity was also discussed. According to Eva Zamrazilová, the economy was in good shape and was being driven by strong consumer demand and exports. Jan Kubíček assessed the growth of the economy as above average. In his opinion, a modest upturn in industry and robust developments in foreign trade were also now apparent at last. However, he saw a downside risk to inflation in sluggish corporate investment. In Jan Procházka’s opinion, industry remained subdued, largely due to persisting weak external demand, which was showing no sign of recovery. As a result, the gap between industry and retail in the Czech economy was widening. This also reflected structural changes in the Czech economy, including a shift in consumption from goods to services. According to Jan Frait, the economy was beginning to overheat, but non-financial corporations were not investing much and the situation in Czech industry was not great as regards profit margins and profitability. The question was whether this combination would have an inflationary impact owing to declining productivity, or an anti-inflationary impact via falling corporate costs.
The discussion moved on to wage growth and the labour market. Eva Zamrazilová and Jakub Seidler highlighted that wage growth was still elevated. Eva Zamrazilová noted that the new forecast expected wage growth of more than 6%, while the steady-state rate was around 4.5%. Jakub Seidler said that wage growth was still stronger in services, where it would be supported by a shortage of workers, which was increasingly viewed as a barrier to growth in the service sector. Jan Procházka attributed part of the observed wage growth and related growth in prices to structural changes and adjustment mechanisms, which monetary policy ought not to hinder. He did not regard the very tight labour market, which was no longer generating rising employment, as necessarily a cyclical phenomenon either. According to Jan Kubíček, the labour market was a source of uncertainty. In his opinion, however, the slow growth in unemployment coupled with declining vacancies indicated that the rise in unemployment was not solely structural in nature.
As regards developments abroad, downside risks to inflation were discussed in particular. According to Karina Kubelková, the geopolitical situation was highly likely to see further shocks in the months ahead. This would inevitably affect economic sentiment and the willingness to invest, which in turn would dampen the recovery in external demand. She added that although a later recovery in Germany was at this point less likely than implied by the autumn forecast, it could still have a major impact on the Czech economy. Jan Frait drew attention to the weak global inflation pressures and the likelihood that some central banks in other countries would ease monetary policy further in an attempt to support full employment. He also pointed to the risks associated with the unusually high valuations of some segments of the equity and alternative asset markets. In his view, minor disruptions to market liquidity were already visible, linked with underpricing of risks in the areas of private credit and commercial property. These risks were moreover interconnected with increasing sovereign risk. As soon as problems arose in one segment, they would spill over to other areas and put central banks under pressure to respond. According to Jan Kubíček, however, it was not possible to respond pre-emptively to a potential correction in financial markets. In Eva Zamrazilová’s opinion, too much importance had been attached over the past decade to anti-inflationary risks originating abroad, even in a situation where domestic demand had been generating inflationary pressures. This had been one of the reasons for the excessively easy monetary policy that had exacerbated the wave of inflation caused by the post-Covid problems and the energy crisis.
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: Josef Simpartl, Monetary Department