As expected, the Czech National Bank cut interest rates by 25bp today, with the key repo rate falling to 3.5%. Six of the seven board members voted in favour. Favourable inflation developments and risks to the economy from US tariffs contributed to the decision. However, the central bank is optimistic in its new forecast, predicting GDP growth of around 2% both this year and next. The bank board continues to highlight inflationary risks. Nevertheless, the CNB staff forecast points to the repo rate declining to 3% as early as 2Q25. Given the board’s hawkish communication, we expect more gradual 25bp cuts at both the August and November meetings, bringing the repo rate to a terminal level of 3%.