As expected, the Czech National Bank left interest rates unchanged at yesterday’s meeting. According to Governor Michl, the current degree of monetary policy tightening is sufficient, giving the central bank scope to assess incoming data and the persistence of inflationary risks. The CNB’s new staff forecast implies that the key repo rate will remain at 3.75% for the rest of this year and throughout 2027. This is also our baseline scenario. While the resilience of the domestic economy argues against early rate cuts, we do not expect further rate increases, as inflationary pressures should gradually ease.

As expected, the Czech National Bank left interest rates unchanged at yesterday’s meeting. According to Governor Michl, the current degree of monetary policy tightening is sufficient, giving the central bank scope to assess incoming data and the persistence of inflationary risks. The CNB’s new staff forecast implies that the key repo rate will remain at 3.75% for the rest of this year and throughout 2027. This is also our baseline scenario. While the resilience of the domestic economy argues against early rate cuts, we do not expect further rate increases, as inflationary pressures should gradually ease.

As widely expected, the Czech National Bank left the repo rate unchanged at 3.75% yesterday. All seven board members voted in favour of the decision. Governor Michl stated that the central bank’s current strategy is to assess the effects of the existing degree of monetary restriction, which he considers sufficient at present.

In its latest forecast, the CNB’s staff revised down its projections for both inflation and economic growth this year. The adjustment most likely reflects the fact that both indicators have recently undershot the assumptions incorporated in the CNB’s May forecast. That forecast projected average inflation of 2.2% and GDP growth of 2.5% in 2026. In the new forecast released yesterday, the CNB now expects inflation of 2.0% and economic growth of 2.2%. While July inflation of 1.7% yoy was in line with the central bank’s expectations, preliminary data from the Czech Statistical Office showed GDP growth of 0.4% qoq in 2Q26, below the CNB’s forecast of 0.6%. Our own outlook is broadly similar, as we forecast both inflation and economic growth at 2.1% this year. We also share the CNB’s view of the outlook for 2027. The central bank expects inflation to rise to 2.5% next year, while economic growth accelerates to 2.7%; our forecast puts both indicators at 2.6%. Governor Michl also noted that inflation is likely to rise temporarily around the turn of the year, while core inflation is expected to remain elevated. As a result, the Bank Board continues to assess the balance of risks as inflationary, largely owing to the persistence of domestic price pressures.

Governor Michl’s remarks at the press conference suggest that interest rates could remain unchanged at upcoming meetings, consistent with the CNB’s latest forecast. The CNB forecast implies that the repo rate will remain broadly stable at 3.75% for the rest of this year and throughout 2027, in line with our own expectations. In contrast, the CNB’s May forecast still allowed for a modest increase in the repo rate over the remainder of 2026, although it also anticipated a subsequent decline towards 3.5% by the middle of 2027. The Bank Board has generally preferred a gradual and smooth approach to interest-rate adjustments, making the new forecast path likely more consistent with its policy preferences. According to Governor Michl, future policy decisions will depend on incoming data, the degree of monetary restriction and the persistence of inflationary risks, including any impact stemming from the conflict in the Middle East. Following the June rate hike, he indicated that the central bank is now in a relatively comfortable position. This assessment was reflected throughout the press conference, which in our view struck a less hawkish tone than the communication following the June meeting.

In our view, the June rate increase does not mark the beginning of a new tightening cycle. Rather, we see it as a pre-emptive response to heightened inflationary risks. The current level of interest rates should gradually contribute to a moderation in wage growth and other domestic inflationary pressures. Although we expect inflation to temporarily rise to around 3% at the turn of this year and next, incoming data already point to a gradual easing in the momentum of several key inflation drivers, including wage growth, credit expansion and residential property prices. We therefore continue to expect the repo rate to remain at 3.75% not only for the remainder of this year but throughout 2027 as well.

Further details on our outlook for economic activity, inflation and monetary policy can be found in our recently published Czech Economic Outlook: https://bit.ly/CEO_3Q26_EN

We expect EBITDA to reach CZK26.5bn in the second quarter (-14% yoy). This yoy decline is mainly due to a fall in the realised price of electricity. However, net profit will rise by 99% yoy to CZK7.9bn. Despite the decline in EBITDA, net profit is growing because the special tax is no longer payable this year; only the standard rate applies.

Announcement date: Tuesday, August 11, 2026, at 7:00 a.m. CET

We expect EBITDA to reach CZK26.5bn in the second quarter (-14% yoy). This yoy decline is mainly due to a fall in the realised price of electricity. However, net profit will rise by 99% yoy to CZK7.9bn. Despite the decline in EBITDA, net profit is growing because the special tax is no longer payable this year; only the standard rate applies.

The decline in revenue in 2Q26 is due to a fall in the price of electricity sold. This year, we estimate the average realised price of electricity to be EUR105MWh, whereas last year CEZ sold electricity at EUR124MWh.  Although the geopolitical situation in the Middle East has pushed up electricity prices, we do not expect this to significantly impact this year's financial performance, given that most of this year's output has already been sold. It will, at least in part, have a positive impact on selling prices in subsequent years. Revenue for 2Q26 is expected to total CZK69.4bn (-6.4% yoy). According to our estimates, EBITDA is set to fall by 14.3% yoy to CZK26.5b. We estimate that just under half of this will come from the Generation segment, with the Distribution segment accounting for around 40%. Net profit for 2Q26 is expected to reach CZK7.9bn. This represents a yoy increase of +98.5%. This sharp rise is due to the effective tax rate, as the special tax (WFT) levied on profits in previous years is not applicable this year. We expect the standard corporate tax rate of 21% this year. Last year, the rate stood at 74% in 2Q. Net profit is adjusted for exceptional items and non-controlling interests (GasNet).

2026 Guidance: Our estimates for 1H26 (e2Q26 plus the already reported 1Q26) correspond to 56.4% of CEZ’s updated full-year forecast at the EBITDA level, and to 67% in terms of net profit. Nevertheless, we expect CEZ’s management to confirm its FY forecasts. However, in a positive scenario, these could be revised upwards. Following the 1Q26 results, CEZ updated its targets to stand at EBITDA of CZK107–112bn and net profit of CZK30–34bn.