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. It fell to 1.4% year on year in February, the lowest level in ten years. According to the Monetary Department’s updated forecast, which partly incorporates higher oil prices, headline inflation will be below 2% this year and very close to the inflation target next year. However, core inflation will remain elevated in the quarters ahead.

Given the current and expected developments, relatively tight monetary policy compared to the past is still needed. Gradually accelerating credit growth is fostering a rise in the quantity of money in the economy. The labour market remains tight and wages are still rising at an elevated pace. Household consumption is also increasing. Still elevated services inflation and property price growth are having an inflationary effect, and commodity prices have gone up.

Today’s decision aims to keep headline inflation stabilised close to the 2% inflation target even after the temporary factors dissipate. This requires credit growth not to be excessive and, therefore, growth in the quantity of money in the economy to remain appropriate. 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, the situation on foreign financial markets and developments in trade relations between countries. It will also assess the transmission of monetary policy to domestic 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

According to the CZSO’s flash estimate, GDP rose by 2.6% year on year in 2025 Q4. Domestic economic growth was still being driven mainly by household consumption. Unemployment remains low. Wages rose by 7.4% year on year in 2025 Q4. Long-term above-average wage growth is contributing to inflationary pressures from the domestic economy. These are reflected mainly in persistently elevated services inflation and significant growth in property prices. This is amplified by the fact that, over the long term, wages are growing fastest in the service sector.

Risks and uncertainties

The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as balanced overall. The macroeconomic impacts of the conflict in the Middle East are a specific risk in the months ahead, one that is difficult to evaluate at present. The Bank Board will carefully monitor these impacts. It will focus not only on the direct and indirect effects of the increase in energy commodity prices on inflation, but also on potential negative effects on economic activity and financial conditions. For the Bank Board, it is important to prevent the impacts of the conflict from passing through to elevated inflation expectations in the Czech Republic. According to the Monetary Department’s analysis, the current impacts do not jeopardise the persistence of the low-inflation environment. The favourable starting conditions in the domestic economy, in particular low inflation and robust growth, do not generate pressure for an immediate reaction. On the contrary, they provide room for analysis and an appropriate response if necessary.

A possible acceleration in the growth of the money supply in the economy caused by lending to households and general government is a domestic 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 additional inflationary risk. The risk of inertia in elevated services inflation, including imputed rent, persists. Trade barriers and uncertainty connected with their intensity pose a downside risk to global economic activity. The weak performance of some euro area economies is an anti-inflationary risk. A global correction of asset prices in an environment of high general government debt in some developed countries is another. The development of the war in Ukraine still 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.