Statement of the Bank Board for the press conference following the monetary policy meeting

Decision

At its meeting today, the Bank Board increased the two-week repo rate by 0.25 percentage point to 3.75%. It also raised the other key interest rates by the same amount. Six members voted in favour of this decision, and one member voted for leaving rates unchanged.

Inflation has been close to the 2% target since January 2024. According to the Monetary Department’s updated forecast, there is a risk of inflation temporarily increasing slightly in late 2026/early 2027. Core inflation has remained elevated at just below 3% for six months without showing a downward tendency. It can be lowered with sufficiently tight monetary policy. Today’s rate increase will help to achieve this.

Accelerating credit growth and debt financing of increased public expenditure are fostering a rise in the quantity of money in the economy. The labour market remains tight and wages are rising at a rapid pace. Prices are increasing above all in the service sector, whose price dynamics are a substantial component of core inflation. Household consumption is also increasing. Still elevated property price growth is having an inflationary effect. According to the Monetary Department’s updated forecast, today’s decision will lead to the maintenance of a low-inflation environment. New data also suggest lower economic growth this year compared to the May forecast.

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. The Bank Board will consider further actions very carefully. 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

Year-on-year GDP growth slowed to 2.2% in 2026 Q1 from 2.7% in 2025 Q4. Domestic demand was still the main source of economic growth, while foreign trade acted against growth. Unemployment remains low. 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 inflationary overall. Persistence of core inflation is a risk in the coming months. A possible acceleration in the growth of the money supply in the economy caused by lending to households and general government is another domestic upside risk to inflation. A possible year-on-year increase in the public finance deficit 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 housing prices, persists.

Despite the de-escalation of the conflict in the Middle East, the Bank Board will continue to closely monitor its macroeconomic impacts. For the Bank Board, it is important to prevent the impacts of the conflict to date from passing through to elevated inflation expectations in the Czech Republic. This time, the domestic economy was subjected to 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.

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.