Minutes of the Bank Board meeting on 18 June 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 fourth situation report based on the updated inflation outlook, the associated risks and an assessment of new data obtained since the spring forecast was drawn up. Consistent with the spring forecast was a rise in short-term market interest rates in Q2.

The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as inflationary overall. Aleš Michl opened by emphasising the need to be hawkish in the spirit of Alois Rašín. He said that the CNB’s primary objective under the law was to maintain price stability. He saw risks in credit growth, debt financing of public expenditure and the dynamics of core inflation. Tight monetary policy was therefore needed to deliver a low-inflation environment.

There was a consensus that despite the external cost shock, the Czech economy was in a quite a comfortable situation, with solid economic growth. Inflation had long been relatively stable close to 2%, and it had been confirmed retrospectively that the CNB’s previous monetary policy stance had been right. According to Jan Procházka, this was evidenced by the stability of the Czech koruna at a time of geopolitical uncertainty and by the anchored inflation expectations. He described the economy as not overheating and close to full resource utilisation. According to Karina Kubelková, the Czech economy was surprisingly resilient. Jan Frait added that the key policy rate remained positive in real terms even under a more pessimistic inflation outlook. It was said repeatedly that despite the recent de-escalation of the conflict in the Middle East, the size, duration and likely normalisation time of the cost shock were already such that some inflationary second-round effects were inevitable. It was therefore important for tighter monetary policy to dampen these effects right at the outset so that they were as short-lived as possible. It was not the central bank’s role to respond to the first-round effects of the cost shock.

The prevailing view in the Board was that the appropriate action was to raise interest rates by 0.25 percentage point. The reasons for this were linked primarily with the domestic economy. They included persistently elevated core inflation (especially in services), strong credit growth across sectors, and high wage growth, which was showing no signs of slowing. So, there were a number of factors that had been exerting an inflationary influence for some time now. External factors (such as the previous rise and current fall in the crude oil price) had been taken into account in the decision, but more as an additional inflationary factor on top of the domestic situation.

The arguments for raising interest rates were discussed in more detail. According to Eva Zamrazilová, the strong domestic demand was generating inflation pressures, especially in the area of services, including housing prices and prices of construction work and materials. Consumption was being driven by rapid wage growth, which was not slowing. Moreover, the planned 11% increase in the minimum wage (even though it only concerned just over 2% of all employees) was a signal in the wage area. Jan Frait said that the labour market had long been showing signs of significant tightness. This partly reflected structural factors, including demographic ones. In the view of Jan Procházka, wage growth had been the most important factor limiting the room to cut rates at past meetings, whereas now, with the inflationary and anti-inflationary factors differently distributed, it was conducive to higher rates. Aleš Michl emphasised that the accelerating growth in loans to households and the debt financing of increased public expenditure were leading to excessive growth in the quantity of money in circulation. According to Jakub Seidler, the trend in lending activity did not indicate that the present interest rate level could be considered too restrictive. Jan Kubíček noted that market rates with longer maturities had recently come down on the back of optimism regarding Iran, thus reversing the previous autonomous tightening of monetary conditions. It was said repeatedly that the current high growth rates of mortgages and partly also loans for consumption were also due to frontloading ahead of the entry into force of the CNB’s recommendation relating to mortgages for the purchase of investment property. Nonetheless, according to Jan Frait there was a credit boom going on in the economy – and not only in the form of conventional rapid growth in loans to the private non-financial sector. The current credit boom was a combination of increased lending at present and large-scale borrowing plans in the private, public and semi-public sectors in the area of future acquisitions of real estate assets and infrastructure. Increasing the cost of short-term funding could send out a signal that monetary policy favours saving and long-term investment over speculative behaviour on asset markets.

The board members also discussed the inflation outlook. So far, core inflation had not been pushed down safely to 2%. On this issue, Jakub Seidler noted that the momentums of services price inflation remained high and that disinflation was not proceeding as expected in this category (despite some positive signs, for example, in the case of producers’ services, excluding the volatile prices of advertising services). He also said that headline inflation was near the 2% target thanks to a favourable combination of administered prices and food prices, whose anti-inflationary effect would fade out next year. Eva Zamrazilová likewise drew attention to the unbalanced structure of the current inflation. Jakub Seidler added that the solid domestic demand, with real wages rising, and firms’ experience with repricing in the last inflation wave could encourage companies to pass on some of their costs more strongly to end prices and to use this year’s events in the Middle East to justify doing so. Jan Kubíček said that we were not yet seeing firms amplifying the cost shock along the production chain and thus exploiting the supply shock to increase their profit margins.

Part of the discussion was devoted to the timing and scale of the change in interest rates. Eva Zamrazilová said that incoming data were no longer indicating any room to wait and see for longer, if monetary policy was to remain moderately tight. According to Jakub Seidler, a 0.25 percentage point rate hike was an appropriate response to the change in the balance of risks and to the need to modestly revise the degree of monetary restriction. In his opinion, a rate hike did not signal a further step and did not mark the start of a cycle, but could not be said to be the last step either. The Board agreed that at future meetings it would base its decisions on an assessment of newly available data and their implications for the inflation outlook. The Board will consider further actions very carefully.

Jan Procházka and Jan Frait mentioned the need to tighten monetary conditions moderately. Jan Kubíček pointed to the gradual build-up of purely domestic demand impulses supported by accelerating lending. This raised doubts as to whether the current mix of monetary conditions was sufficiently restrictive. He therefore considered a 0.25 percentage point change in interest rates alone to be too mild to cool the inflation pressures in core inflation and reduce credit growth. However, a somewhat stronger exchange rate, a correction of energy commodity prices or an autonomous slowdown in the property market could play a role. Some of the board members also mentioned the signalling effect of a rate hike. Conversely, Karina Kubelková did not regard the benefit of a preventive hike as so clear-cut in such a dynamic situation. Although the de-escalation of the tensions in the Middle East was still fragile, one of the main upside risks to inflation was beginning to recede. According to Karina Kubelková, this made it possible to wait for new information and to link any rate increase to the summer forecast, which would also cover 2028. She considered the risk of a monetary policy error associated with keeping rates unchanged to be acceptable given the scale of the current uncertainties.

After discussing the situation report, the Bank Board increased the key policy rates by 0.25 percentage point. Six members voted in favour of this decision: Aleš Michl, Eva Zamrazilová, Jan Frait, Jan Kubíček, Jan Procházka and Jakub Seidler. Karina Kubelková voted for leaving rates unchanged.

Authors of the minutes: Petr Sklenář and Jan Syrovátka, Monetary Department