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 be in the upper half of the tolerance band for the rest of this year due to growth in fuel prices. Core inflation will remain elevated, also moving around 3%.
The Bank Board made its decision today amid exceptional uncertainty stemming from the conflict in the Middle East. It discussed various scenarios outlining the impacts on both inflation and real economic activity. The Bank Board concluded that, given the expected developments, monetary policy needs to be kept relatively tight. 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. Fuel prices have gone up. Household consumption is also increasing. Still elevated services inflation and property price growth are having an inflationary effect.
Today’s decision aims to keep headline inflation stabilised close to the 2% inflation target over the monetary policy horizon. 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 requires relatively tight monetary policy.
Economic developments
According to the CZSO’s preliminary estimate, year-on-year GDP growth slowed from 2.5% to 2.1% in 2026 Q1. Domestic demand was still the main source of economic growth, while foreign trade acted against growth. 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.
Outlook
According to the Monetary Department’s new forecast, inflation will be in the upper half of the tolerance band for the rest of this year. It will average 2.2% this year and 2.4% next year.
According to the Monetary Department’s forecast, Czech GDP will grow by 2.5% this year and 2.7% next year.
Risks and uncertainties
The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as inflationary overall. The macroeconomic impacts of a prolonged conflict in the Middle East are a risk in the months ahead. 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. This time, the Czech economy faces the cost shock in good starting condition. Monetary policy has remained tight for some time and inflation has been at the target level for more than two years. This provides room for thorough analysis and an appropriate response should it be 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. By contrast, the weak performance of some euro area economies and a possible global correction of asset prices in an environment of increased geopolitical uncertainty and high levels of debt in some developed countries may have an anti-inflationary effect. Trade barriers and uncertainty connected with their intensity also remain a risk to global economic activity. 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.