Minutes of the Bank Board meeting on 17 September 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 sixth situation report based on the updated inflation outlook, the associated risks and an assessment of new data obtained since the summer forecast was drawn up. Consistent with the summer forecast was broad stability of short-term market interest rates.

The Bank Board assessed the risks and uncertainties of the outlook for the fulfilment of the inflation target as inflationary overall. In this regard, Aleš Michl emphasised the need to remain hawkish and never let up in the fight against inflation.

The Board assessed the current monetary policy stance as appropriate. There was a consensus in the discussion that growth in market rates with longer maturities had led to an autonomous tightening of financial conditions. This, combined with the rate hike in June and the still strong koruna, provided room for a thorough assessment of the new data and the upside risks to inflation. If domestic demand proved resilient, lending remained strong and the external cost shock persisted, the appropriate response by the central bank could be to raise interest rates slightly further. Given the continued transmission of market rates with longer maturities to client rates, which was delivering a gradual tightening of financial conditions, Jan Kubíček regarded the risk of a monetary policy error if rates were kept unchanged at this meeting as low.

Commenting on the August inflation reading of 1.9%, Jan Frait said that it could not be interpreted as an absence of domestic inflation pressures, as core inflation remained quite high and services prices were still rising at an elevated pace. Jakub Seidler added that despite the positive signs in the momentum of services prices, headline inflation was still being dampened significantly this year by a decline in food prices and by administrative energy price measures, which would soon fade out. Eva Zamrazilová agreed, drawing attention to the still unbalanced inflation structure, which could move in an adverse direction over the months ahead. Jan Kubíček noted that inflation would probably rise above 3% for the first time in three years at the beginning of next year. In his opinion, it was therefore necessary to communicate in an appropriate way that this was expected and would be only temporary. Karina Kubelková pointed to the low food price base, which created room for higher annual food price inflation next year, especially in combination with other factors such as drought and higher prices of fertilisers. This was confirmed by Jan Procházka, according to whom a reversal of the trend in food prices was inevitable.

The Board welcomed the fact that the energy shock was so far having no second-round effects on consumer prices. However, it was said repeatedly that the situation had been more serious since the summer, as the growth in crude oil prices had been joined by rising prices of natural gas and electricity. Jan Frait noted that the conflict in the Middle East had thus become a source of another cost shock, one that could be longer-lasting and that central banks would not be able to ignore. Eva Zamrazilová emphasised that, with the conflict dragging on, its second-round effects could soon show up in core inflation. This constituted a risk to the fulfilment of the inflation target. According to Jakub Seidler, the likelihood of these effects materialising was increasing as the duration of the shock increased, although partly also due to the still strong domestic demand. However, he added that the temporary ceasefire in June had shown that energy prices could correct fairly quickly after the situation calmed down. Jan Kubíček described the boundary between the first-round and second-round effects of the supply shock as rather blurred. The second-round effects could manifest as the said prices failing to decline even after commodity prices return to their original levels. In his view, their intensity also depended on the state of the economy at the time of the shock, which now implied a need for the central bank to exercise heightened vigilance.

The board members agreed that despite the external cost shock, domestic demand remained fairly resilient. According to Jan Kubíček, the data from the domestic economy for the second quarter should be interpreted with caution, due to an unusually large decline in inventories. Especially at a time of a supply shock, account should be taken of aggregate demand, which had been rising faster than GDP for a long time. Karina Kubelková regarded the slower-than-expected growth of the Czech economy as one of the factors partially reducing the need to tighten monetary policy further. According to Jan Frait, economic growth in the euro area and in the United States remained subdued despite significant fiscal stimulus, and he did not see clear evidence of strong demand in the domestic economy either. He described this as an argument for a cautious approach to the timing and calibration of further monetary policy responses. Jan Procházka characterised the domestic economy as not overheating, adding that economic activity could not be expected to pick up without a visible recovery of external demand. He noted that the postponement of expected growth was making it less likely that the growth would occur to the originally assumed extent.

In a discussion of lending, the board members focused above all on the high growth in loans to non-financial corporations. Jakub Seidler pointed out that the year-on-year growth in these loans had further accelerated into double digits, even when adjusted for the influence of large companies, whose large transactions can affect the aggregate figures. Jan Kubíček added that this was a robust trend driven primarily by standard corporate loans. According to Jan Frait, credit growth was high but could not yet be described as a clear credit boom. However, if the strong lending activity persisted in the autumn, it would be another indication that domestic monetary conditions were not restrictive enough despite the tighter financial conditions. Jan Procházka mentioned that the strong credit activity of households, companies and the government could intensify the inflationary pressures in the longer term, because it was fostering growth in the quantity of money in the economy. Eva Zamrazilová agreed, also noting that the elevated lending activity in the consumer credit segment could quickly pass through to consumer prices. According to Karina Kubelková, the solid credit growth and the effect of fiscal policy remained arguments in favour of a restrictive monetary policy stance.

The debate on pay mainly concerned the wage growth revision in September, when year-on-year average wage growth in the first quarter had been revised down from 8.1% to 6.1%. According to Eva Zamrazilová and Karina Kubelková, despite this revision, wage growth remained quite high above the steady-state level consistent with the fulfilment of the inflation target. Jakub Seidler agreed, adding that neither the revision nor the weaker wage growth in a context of low productivity growth allayed concerns that wages would have an inflationary effect. In this regard, Karina Kubelková emphasised the data uncertainty, which was distorting the true wage situation and would continue to do so over the coming quarters. According to Jan Procházka, the growth in domestic wages was a sign of catching up on lost purchasing power and forced structural changes associated with the migration of workers from industry to services, which was simultaneously contributing to slower labour productivity growth. Eva Zamrazilová noted that real wages had been growing faster than labour productivity for three years in a row. This was increasing unit labour costs, which are a guide for monitoring inflation pressures. In her view, the planned increase in the minimum wage of 11% could put additional upward pressure on wages without bringing about any increase in labour productivity.

After discussing the situation report, the Bank Board kept interest rates unchanged. All seven members voted in favour of this decision: Aleš Michl, Eva Zamrazilová, Jan Frait, Karina Kubelková, Jan Kubíček, Jan Procházka and Jakub Seidler.

Author of the minutes: Petr Sklenář, Monetary Department