The Czech National Bank left interest rates unchanged yesterday, as expected. The bank board assessed the risks to the inflation target as balanced, as in December. Governor Michl said that the board was considering either cutting rates slightly or leaving them unchanged at the February meeting. A recent shift in the central bank’s communication had already indicated the potential for monetary policy to be eased. Nevertheless, all seven board members voted in favour of stable rates. Furthermore, during the press conference, the governor’s statements focused mainly on inflationary risks. He highlighted the ongoing rapid growth in service prices and still elevated core inflation. We do not expect the CNB to cut interest rates this year, as this year’s decline in inflation below the target is likely to be only temporary. We forecast inflation to accelerate again in 2027 due to expansionary fiscal policy and strong economic growth. The new CNB staff forecast paints a similar picture of macroeconomic developments and also does not anticipate a cut in interest rates. By contrast, the CNB forecast suggests a rate hike by the end of this year.