Czech National Bank to raise key rates

Source: Xinhua | 2020-02-07

The Bank Board of the Czech National Bank (CNB) voted to raise its two-week repo rate by 25 basic points to 2.25 percent on Thursday, the bank said in a press release.

The new rate, the first change since May 2019, will become effective on Friday.

The CNB also decided to raise the Lombard rate, the percentage at which commercial banks can borrow money from the central bank against collateral, to 3.25 percent. The discount rate was also raised to 1.25 percent.

CNB Governor Jiri Rusnok said during a press conference that the new rates are based on the CNB's new macroeconomic forecast that was published the same day. Consistent with the forecast is an initial increase in domestic market interest rates, followed by a decline in the second half of this year. The initial rise in interest rates primarily reflects still increasing domestic inflationary pressures, said the CNB.

The central bank predicted gross domestic product growth will continue to be driven mainly by rising household consumption expenditure.

After the CNB board's decision on Thursday, the Czech Crown began trading against the euro at its highest value since October 2012.