The CNB’s interest rates remained unchanged after yesterday’s meeting, as expected. There were no surprises in Governor Michl’s press conference either, as he continued to emphasise inflationary risks. However, he said that the central bank’s next steps could go either way and would be data dependent. In its new forecast, the CNB expects slightly lower inflation and economic growth this year and next, but slightly higher interest rates. Due to the assumption of a more expansionary fiscal policy, we expect the CNB to keep rates stable for an extended period. Nevertheless, we still see a greater likelihood for rates to be cut rather than hiked in its next move, provided that the more expansionary fiscal policy does not materialise and the disinflationary trend in the economy persists.

The CNB’s interest rates remained unchanged after yesterday’s meeting, as expected. There were no surprises in Governor Michl’s press conference either, as he continued to emphasise inflationary risks. However, he said that the central bank’s next steps could go either way and would be data dependent. In its new forecast, the CNB expects slightly lower inflation and economic growth this year and next, but slightly higher interest rates. Due to the assumption of a more expansionary fiscal policy, we expect the CNB to keep rates stable for an extended period. Nevertheless, we still see a greater likelihood for rates to be cut rather than hiked in its next move, provided that the more expansionary fiscal policy does not materialise and the disinflationary trend in the economy persists.

In line with expectations, the Czech National Bank left interest rates on hold again at yesterday’s meeting. The key repo rate therefore remains at 3.5%, where it has been since the last cut in May. This decision was backed by all seven members of the CNB board.

Governor Michl’s press conference revealed nothing new. He continued to emphasise inflationary risks, particularly those stemming from the domestic economy. In this context, he again mentioned the rapid growth in services and house prices, as well as wages. Although Governor Michl did not speak out as vocally against more expansionary fiscal policy as he had done at previous press conferences, this risk continued to feature prominently in the CNB board’s written statement. Regarding this, Governor Michl said that the central bank would first analyse the measures suggested by the likely future government and then estimate their impact on economic growth and inflation. Consequently, the newly published CNB forecast does not include possible changes in fiscal policy.

The CNB’s new forecast includes lower inflation, which nevertheless remains above 2%. The central bank expects consumer prices to grow by an average of 2.5% in 2025 and slow down to 2.2% in 2026 – 0.1pp less for both years vs its August forecast. Our estimate for 2025 is only slightly lower at 2.4%. However, our forecast for 2026 is significantly lower at 1.5%, as it already reflects the government’s planned measure to transfer payments for renewable energy sources from households to the state. The CNB has also reduced its GDP growth estimate to 2.3% for 2025 and 2.4% for 2026, whereas it had originally expected 2.6% for both years. This still is a more optimistic outlook than our own forecast, at 2.1% and 1.6%, respectively. For 3Q25, the central bank estimated an increase in GDP of 0.2% qoq, so it was surprised by the 0.7% growth resulting from the CZSO’s advance estimate, as were we.

In light of the anticipated more expansionary fiscal policy, we have removed the prospect of further cuts to the CNB’s interest rates from our forecast. We expect the repo rate to remain at 3.5% for an extended period. This is because we anticipate that the fiscal expansion will alter the trend in economic and inflation developments over the monetary policy horizon, i.e. at the turn of 2026 and 2027. While the economy would grow faster, we predict that higher government spending would cause inflation to rise above the CNB’s target again after falling below 2% in 2026 due to cheaper energy. The interest rate trajectory in the CNB’s new forecast roughly corresponds to ours but is slightly higher than in its previous forecast, despite downward revisions to inflation and GDP estimates. However, the CNB expects a significantly weaker koruna than we do, so its forecast includes easier overall monetary conditions.

However, we still consider a cut to be more likely than a hike for the next move in CNB rates. When a new government is established and the state budget for 2026 is approved, likely at the turn of the year, it should become clear whether a more expansionary fiscal policy is materialising. If this does not happen, it is possible that the disinflationary trend in the economy will persist next year. In this case, the central bank would have to lower interest rates further. At the press conference, Governor Michl said that the CNB board remains open to adjusting interest rates either way, depending on newly released data.

For more information about our forecasts, see the recently published Czech Economic Outlook: https://bit.ly/CEO_4Q25_EN.

The results for 3Q25 will show strong growth in the Distribution segment due to the consolidation of the acquired company, GasNet. According to our projections, EBITDA for the quarter will reach CZK32.0bn (+3.7% yoy), while net profit will reach CZK5.8bn (+57% yoy). These estimates represent 79% and 80% of the full-year targets, respectively. We expect CEZ's management to reiterate its guidance.

Announcement date: Tuesday, November 11, 2025 at 7:00 a.m. CET

The results for 3Q25 will show strong growth in the Distribution segment due to the consolidation of the acquired company, GasNet. According to our projections, EBITDA for the quarter will reach CZK32.0bn (+3.7% yoy), while net profit will reach CZK5.8bn (+57% yoy). These estimates represent 79% and 80% of the full-year targets, respectively. We expect CEZ's management to reiterate its guidance.

According to our estimates, CEZ will report total revenues of CZK80.6bn for 3Q25. This would represent a 2.2% yoy decline. EBITDA likely grew by +3.7% yoy, reaching CZK32bn. We anticipate robust growth in the Distribution segment due to the consolidation of GasNet, which has been part of CEZ since September 1, 2024. The average realized price of electricity is expected to be around EUR125/MWh, down from the EUR135/MWh price at which CEZ sold electricity in 3Q24. We expect nuclear power plants to generate more electricity yoy. This should offset lower production from coal-fired units. Since CEZ primarily supplies its coal-fired power plants with coal from its own mines, the Mining sector should also decline. Depreciation will increase significantly due to the integration of GasNet. Higher depreciation is also due to accelerated depreciation of coal-fired power plants. We expect the effective tax rate to be 60%. This would be a substantial decrease from 86% in 3Q24. We expect net profit to be CZK5.8bn (+57% yoy).  

2025 Guidance: After publishing its half-year report, CEZ increased its FY goals. The EBITDA projection is CZK132-137bn, and net profit is expected to reach CZK26-30bn. Our YTD estimates (reported 1H25 plus our e3Q25) are 79% of the full-year EBITDA target and 80% of the net profit target. This is compared to the midpoint of the given ranges. We expect CEZ to conservatively reiterate its projections. However, in an optimistic scenario, we anticipate that CEZ will increase its full-year targets, as it did after each quarterly report this year.