Minutes of the Bank Board meeting on 6 August 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 fifth situation report and the new macroeconomic forecast. According to this forecast, inflation would be in the upper half of the tolerance band around the inflation target over almost the entire forecast horizon. Consistent with the baseline scenario of the forecast was broad stability of interest rates.
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 for tight monetary policy, which was reducing the persistent inflation pressures stemming from the domestic economy.
The Bank Board assessed the current monetary policy stance as appropriate. Aleš Michl said the June interest rate hike had further tightened monetary conditions. This now made it possible to continuously evaluate new data and the effect of monetary policy. Jan Frait expressed the opinion that the broad monetary policy stance was in line with the overall macroeconomic and financial trends. According to Jakub Seidler, the reasons for tighter monetary policy underlying the rate increase at the June meeting remained. They related mainly to persistent demand-driven inflationary pressures in the domestic economy combined with possible second-round effects of higher commodity prices resulting from the conflict in Iran. Since the last monetary policy meeting, however, data had come in that were slightly more optimistic as regards the domestic upside risks to inflation, were reducing the acute need for a further response, and were therefore allowing the Board to await further developments. Karina Kubelková pointed out that monetary policy was now restrictive in both its interest rate and exchange rate components, and the elevated long end of the yield curve was further tightening monetary conditions. At the same time, there was a risk that the exchange rate of the koruna would stay at its current stronger levels. According to Jan Kubíček, there were now three conditions for keeping rates unchanged – the excessively rapid wage growth would have to end, the long-awaited disinflation in core inflation would have to begin, and lending would have to stop accelerating.
The next topic of debate was the solid growth in lending. The board members agreed that the high growth in genuinely new mortgages seen in the first half of the year had probably been caused by frontloading in the context of the tightening of the rules for the provision of investment mortgages and households’ concerns of a potential rise in mortgage rates. Jakub Seidler felt that credit growth was still strong, but he saw signs of it slowing in a context of lower growth in new mortgage and consumer loans following the high growth rates recorded in April. According to Jan Frait, credit growth was high, including in relation to income growth, but for now it could not be said that the Czech economy was experiencing a credit boom. Indebtedness was not rising too much, but if the elevated credit growth were to continue in the years ahead, it could create heightened risks. He felt that the current monetary policy might not be so restrictive in view of the growth in loans. Jan Kubíček added that the evolution of market rates and its transmission to client rates had brought about a tightening of conditions, and that the increase in deposit rates in the middle of this year was also likely to add some restriction.
The main topic of the discussion about prices was the effect of volatile and persistent items in the consumer basket. According to Eva Zamrazilová and Jakub Seidler, headline inflation was currently staying below the inflation target due to food prices and retail energy prices, which were affected by administrative measures. By contrast, services prices and consequently also core inflation were elevated and persistent. Jakub Seidler mentioned that inflation excluding prices of energy, food, alcohol and tobacco was near the upper boundary of the tolerance band and had gone up moderately further in July. Jan Procházka added that the volatile items and the base effect would probably cause inflation to rise in late 2026/early 2027. It was necessary to emphasise in communications that this was expected and not a result of new inflation pressures. Jan Procházka then identified property prices as an uncertainty. There were signs that their growth was now slowing, but the future intensity of this slowdown was uncertain. The other board members agreed.
The discussion of the state of the real economy primarily concerned the demand situation and the effect of the foreign environment on domestic economic growth. The Board assessed domestic demand growth as solid. According to Jan Kubíček, however, the GDP growth figures since the start of the year had been rather disappointing. This was probably linked with external demand, because domestic aggregate demand was growing fairly quickly. Jan Procházka agreed that the Czech economy could not be expected to show stronger growth unless the global situation calmed and external demand recovered. Karina Kubelková drew attention to the solid growth of Czech industry, with the automotive industry in particular doing relatively well in the context of the situation of this sector in Europe. Eva Zamrazilová pointed to the structure of the economic growth, which now seemed more inflationary than indicated by the GDP growth slowdown. The structure of inflation – i.e. continued rapid growth in core inflation driven by services prices with no major changes – was consistent with this.
In a discussion of the labour market, the Board focused on wage growth as an important inflation factor. The board members said that the evolution of wages was currently shrouded in data uncertainty. Jan Procházka linked this with the launch of the Single Monthly Employer Report. He also drew attention to the latest wage growth estimates, which were still indicating continued high wage growth. Eva Zamrazilová said that despite the considerable data uncertainty, it was clear that the current wage growth was still well above the steady-state level consistent with the inflation target. Jakub Seidler agreed, adding that wage growth should be assessed in the context of the weak growth in productivity recorded recently.
The discussion of developments abroad mainly concerned the situation around the conflict in the Middle East and the uncertainty surrounding external economic developments. According to Eva Zamrazilová, the long-term implications of the closure of the Strait of Hormuz ranked among the factors that were difficult to quantify, and the question was to what extent domestic inflation would be affected by the elevated prices of certain commodities. Karina Kubelková was of the opinion that if the conflict entered a stalemate interrupted by incidents and the Strait of Hormuz was partially reopened, this would be a scenario whose impacts the global economy would be able to absorb. Jan Frait identified as a potential risk a situation in which excess capacity were to build up in some economic sectors in developed countries with strong support from relatively costly external resources. This could ultimately have disinflationary consequences. Jan Procházka also identified the international situation as uncertain and noted that lacklustre external demand was more likely to reduce the probability of the expected recovery than just to put it off.
At its meeting, the Bank Board kept interest rates unchanged. The two-week repo rate thus remains at 3.75%, the discount rate at 2.75% and the Lombard rate at 4.75%. All seven members voted in favour of this decision.
Author of the minutes: Petr Sklenář, Monetary Department