Financial News: Czech Central Bank Holds Rate Steady Again

Czech Central Bank Holds Rate Steady Again

(RTTNews) - The Czech National Bank left its key interest rate unchanged for a fourth rate-setting session in a row, citing the lingering inflationary pressures, and stressed on the need for a tight policy stance.

The seven-member Monetary Board, led by Governor Ales Michl, unanimously decided to hold the two-week repo rate steady at 3.5 percent on Thursday, in line with expectations. The previous change in the rate was a 25-basis points reduction in May.

"The ongoing inflation pressures from the domestic economy currently preclude a further decrease in interest rates," the CNB said. "Given the current and expected developments, relatively tight monetary policy is still needed."

The central bank projected inflation to remain slightly above 2 percent until the end of next year, and core inflation to remain elevated in the quarters ahead.

Rising credit growth and wages, a tight labor market, strengthening household demand, high services inflation and increasing property prices pose risks to the inflation outlook, the bank said. Meanwhile, a stronger koruna exchange rate could have an anti-inflationary effect, the bank added.

The CNB's Monetary Department projected inflation to average 2.5 percent this year and slow to an eight-year low of 2.2 percent next year.

The Czech GDP was forecast to grow by 2.3 percent this year, and faster paces of 2.4 percent and 2.8 percent in the subsequent two years.

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