By Krystof Chamonikolas and Kriti Gupta (Bloomberg 11. 6. 2025)
Czech central bankers need to keep high borrowing costs in order to prevent an inflation resurgence, Governor Ales Michl said, adding that he expects the benchmark rate to stay unchanged for “some time”.
Czech rate setters last month lowered the benchmark rate for a second time this year after they switched to a stop-and-go mode following rapid cuts last year. To avoid a repeat of the post-pandemic inflation crisis, the Czechs need to maintain tighter conditions than in the neighboring euro area, the country’s dominant trading partner, Michl said during a Bloomberg event in Prague.
“The base repo rate currently is at 3.5%, and I expect it will remain at this level for some time,” he said.
The koruna’s appreciation this year is helping to keep consumer price growth near the 2% target, according to the governor.
“We still need high interest rates to keep inflation low in the long term,” Michl said. “We also need positive real interest rates.”