Interview with Eva Zamrazilová, CNB Deputy Governor
By Peter Laca (Bloomberg 29. 7. 2025)
Czech interest-rate cuts are “almost certainly” over for now as the central bank tackles inflation risks from soaring property prices, consumer spending and an improving economic outlook, a senior policymaker said.
After a rapid pace of monetary easing last year, rate setters at the Czech National Bank have applied a stop-and-go approach since December. Market bets are predicting a hold on the benchmark rate at 3.5% on Aug. 7, but some analysts still see room for easing in the months ahead.
While fuel prices and a stronger koruna are helping to tame inflation, data are registering faster growth in service prices, Deputy Governor Eva Zamrazilova said. The shift, reflecting robust wage growth and strong household consumption, will take time to manage and require keeping monetary conditions tighter for longer, she said. “From this point of view, for me the cycle of monetary easing is almost certainly finished,” Zamrazilova said in an interview on Monday. “It’s about nothing else than domestic demand.”
Policymakers in Prague have been increasingly focused on the housing market as an inflation driver, with listing prices of new and older homes jumping by 17% year-on-year in the second quarter, according to Czech Banking Association data. Rates will need to remain somewhat elevated to avoid fueling property prices, Zamrazilova said. But that shouldn’t spur the central bank to lift borrowing costs for now, which would have little impact on long-term rates and may cause damage, she said. “For me, raising rates isn’t something that I’m thinking about at the moment, as it would achieve very little at a very high cost,” she said. “But the trend in housing prices is a reason for not lowering rates further.”
‘Putting Money Into Bricks’
She framed the housing-market boost as driven by factors outside policymakers’ influence, reflecting an urge to seek safe returns. About half of home purchases in the Czech Republic are financed without a mortgage, indicating a tendency among households to hoard savings. “The trend that I don’t see as positive is that real estate is perceived as a de-facto, risk-free investment asset,” she said. “This presents a challenge for the financial markets to offer alternative products that would attract investors and lure them away from putting money into bricks.”
The Czech government, rather than the central bank, must reduce the appeal of real estate, Zamrazilova said. That could entail tax-policy changes and a potential reassessment of rules granting non-European Union investors the same ownership rights as less affluent Czechs, she said.
Recent data meanwhile have shown a more optimistic economic picture, with signs of a gradual recovery in industry and sentiment indicators pointing to a better outlook for foreign demand, the deputy governor said. The latest announcement about a US-EU agreement on trade tariffs also removes potential barriers to Czech economic activity and underpins an outlook for this year’s growth to exceed the central bank’s spring forecast of 2%, she said. “It’s worse than if there were no tariffs, but it supports expectations that the economy won’t slow below 2%,” Zamrazilova said. “That risk has been more or less eliminated now.”