Interview with Jan Frait, CNB Deputy Governor
By Jan Lopatka and Jason Hovet (Reuters 27. 1. 2026)

CNB Deputy Governor Jan Frait said in an interview with Reuters that the Bank Board may already address the issue of a slight reduction in interest rates at the upcoming monetary policy meeting, primarily in response to external factors and developments abroad. He stressed, however, that domestic economic conditions – including the economic recovery, a tight labour market, accelerating wage growth and loose fiscal policy – do not provide arguments in favour of easing.

According to the Deputy Governor, interest rates could remain broadly at their current level this year, or decline only marginally. He estimated that the maximum room for monetary policy easing this year would be no more than 50 basis points. He did not wish to pre-empt how he would vote at the next meeting, noting that the decision would depend on the new macroeconomic forecast and the discussion within the Bank Board.

Jan Frait also noted that, from his perspective, the key topic of the upcoming meeting would be the external environment, including developments in global financial markets and the monetary policy stance of major central banks, which could in the future create pressure for an easing of monetary conditions in the Czech Republic.

Interview 

The board of the Czech central bank could discuss slight monetary easing at a policy meeting next week due to external factors that may lead large central banks to cut rates, Deputy Governor Jan Frait said in an interview.

Frait told Reuters on Monday the domestic recovery, a tight labour market, wage growth and loose fiscal policy spoke against easing but the external situation could change the picture, although he has not decided how he would vote.

Rates may stay broadly stable this year or dip by at most 50 basis points, the central bank veteran said.

The Czech National Bank (CNB) halved the main repo rate to 3.50% before pausing in May last year.

For some time it seemed the next move could be up, but in December, the board of seven shifted its view of the risks to meeting its 2% inflation target to “neutral” from “inflationary”.

“I assume that we will conduct the debate at the next meeting in a similar spirit – to what extent the balance of domestic and external (factors) moves the risks in this or the other direction, and whether the interest rate environment continues to be adequate,” Frait said in an interview.

He said labour market and wage developments were “truly an argument for maintaining relatively higher interest rates.”

But the external environment was already cause for debate at the February 5 meeting, where new forecasts will also be debated.

“In my view the external forces are exactly what the meeting will be and should be about... it is a very, very strong set of factors,” Frait said.

“We should, of course, have a pre-emptive policy and we should forecast future trends with a high probability. I do not know if it will happen (a cut), and at the same time I am not saying how I myself will vote.”

Eye on external environment

Analysts do not expect near-term cuts by the European Central Bank or U.S. Federal Reserve – with the latter possibly easing later this year – but Frait said factors in the global economy and policymaking may be building up for easing.

“For central banks, especially in developed countries, a certain group of factors is accumulating that can induce central banks’ reaction, in the future, to various developments by loosening monetary policy on the short end,” Frait said.

The factors include growth of longer-term market rates, or signs of imbalances in financial markets, he said.

Frait has correctly predicted the pace of upcoming rate moves at the start of the last two years.

“I am much less certain than ever before for 2026”, he said. “I would say that, for us, rates will remain roughly where they are, although I do see a certain possibility that they will go marginally lower.”

Czech headline inflation, below the bank’s forecast at 2.1% in December, could fall a few decimal points below the target due to a government subsidy on energy bills.

The central bank excludes such steps from its decision-making, Frait said. But it may reduce inflation expectations, and has historically influenced inflation-targeting central banks’ decisions, he added.