The Czech National Bank has cut its main interest rate by 0.25 basis points to 4%, maintaining the policy of lowering the interest rates begun last December when interest rates were 7%.

“Monetary policy nonetheless remains tight,” CNB wrote in a statement, adding that “real interest rates are positive and are dampening lending activity, and hence the creation of money in the economy, and, in turn, long-term inflation.”

Five of the seven board members backed the decision, while one member voted to leave the rates unchanged and one voted for lowering by 0.50bp.

The CNB also worsened the macroeconomic prognosis. It now forecasts gross domestic product growth of 1% this year and 2.4% next year, down on the previous forecast of 1.2% and 2.8% growth, respectively. It projects higher inflation growth as well – 2.5% this year and 2.6% next year, up from a previously projected 2.2% and 2%.     

“The economy is revitalising slowly, it is performing below its potential,” commented CNB’s governor Aleš Michl, who also pointed out that inflation remains slightly above the CNB’s 2% target level, “confirming that the CNB is correct in its careful approach to lowering of the interest rate”.

Czech inflation stayed at 2.6% in September. 

The CNB also expects the koruna (CZK) to weaken next year and in 2026 to average CZK25.40 per €1. It kept the average currency forecast for this year at CZK25.10 per €1.