The Czech National Bank raised its base interest rate by 0.25 percentage point to 4 percent on Thursday. The board also lifted the Lombard and discount rates by the same amount, to 5 percent and 3 percent. The decision was not unanimous: four board members voted for the increase and three voted to keep the rate unchanged. The base rate is now at its highest level since the start of 2025, and the market had expected the tightening.
Inflation pressures persist
Governor Aleš Michl said the decision was close. He pointed to pressures toward higher inflation in the Czech economy, notably persistent core inflation and continued rapid wage growth. The bank also sees a risk of faster money supply growth, driven by lending to households and government institutions.
The central bank worsened its outlook for Czech economic development both this year and next. The Lombard rate lets commercial banks borrow from the central bank against securities collateral. The discount rate, by contrast, is used to set penalties on unpaid loans.
A split board
Three members preferred to hold rates where they were.
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Source: Czech National Bank
