Interview with Eva Zamrazilová, CNB Deputy Governor
By Jan Lopatka (Reuters 24. 10. 2025)
The Czech National Bank should leave interest rates unchanged until the end of the year and possibly for longer to counter inflation pressures from wages and real estate, CNB Vice-Governor Eva Zamrazilova said.
Economic growth will continue to be driven by strong demand from households benefiting from fast wage growth, Zamrazilova told Reuters in an interview on Thursday.
The bank reduced rates from a peak of 7.00% to 3.50% in a series of cuts lasting until May this year, but it has held them steady since then as core inflation remains above its 2% target and services prices especially continue to rise at a rapid pace.
"I don't see a fundamental reason for any change now, and probably not until at least the end of the year," Zamrazilova said, reiterating her stance of previous months.
Service price risks remain
She said she did not see beyond January, which often brings larger price shifts, although no shocks were expected this time. The next move in interest rates may be in either direction, she said.
"I think that all options are really open. I see further stability as the preferred scenario, but of course changes have to come from time to time."
Headline inflation dipped to 2.3% in September, below the bank's forecast of 2.6%.
But services prices continued to grow at a 4.7% pace, which Zamrazilova said could be attributed to a continuing catch-up with inflation in the goods sector in recent years but also to overheating owing to consumption growth.
"It really can be just catching up with goods, that's the positive explanation. But there is a risk that there could be permanent pressure, especially for some types of services," she said.
"It's a question of which component will prevail, whether the overheating in consumption of services will actually calm down in some way, but that would require calming down of wage growth as well. If wages keep rising at this pace, it will only add to the risk of further overheating."
Wage growth above safe rate
Wages grew by 7.2% year-on-year in the first half, above the bank's forecast and significantly above a rate of around 4.5% which Zamrazilova said the bank sees as safe for inflation.
Elevated wage rises may continue next year driven by the public sector which could gradually lead to contagion in the private sector, Zamrazilova said.
There were, however, anti-inflationary signals from food prices, particularly in farm crops, she said.
The bank's new forecast to be published after the November 6 policy meeting may see marginally lower growth and inflation this year and next than the current forecast, Zamrazilova said, while the balance of risks to price growth remains on the upside.
"It is still inflationary, mainly wage growth, growth in real estate prices, growth in prices of construction work, construction materials, and of course, we keep mentioning the risks arising from the development of public finances."