The Czech Central Bank (CNB) kept its official interest rate at 4.00% on Thursday, pausing its recent sequence of rate cuts, leading Capital Economics to forecast a resumption of the easing cycle, anticipating a decline in rates up to 3.00% at the end of next year. year.
The decision to keep rates stable aligns with the predictions of analysts, including those at Capital Economics. This pause is the first since the CNB began a series of rate cuts totaling 300 basis points from December 2023.
Central bank officials have indicated a more cautious approach to future monetary easing as the policy rate moves closer to the estimated neutral level of 3.00-3.50%.
Despite the current shutdown, the inflation outlook is positive, with expectations of continued rate cuts in 2025. Inflation has been consistently within the central bank’s target range of 1.0%-3.0% throughout the year .
Capital Economics projects this trend will persist over the next year, leading to an additional 100 basis points in rate cuts spread across the year, culminating in a policy rate of 3.00% by the end of 2025.
The planned policy adjustments are expected to position Czechia among the few emerging markets (EM) that will return to a neutral monetary policy stance.
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