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Ad-hoc reports: CNB cuts rates by 50bp despite weak economy and on-target inflation

21/03/2024 13:21

At its March meeting yesterday, the Czech National Bank cut interest rates by a further 50bp and confirmed its determination to continue easing only gradually. The main reasons for this are the weaker koruna and continued rapid rise in services prices. According to Governor Michl, these two factors will determine the future course of interest rates. We expect them to be lowered by 50bp at the May, June and August meetings, which would reduce the current mismatch between interest rates and economic and inflation developments. We expect the repo rate to fall to 3.5% by the end of the year. The bank board still considers the policy-neutral interest rate of 3% to be too low. In this context, the central bank should publish an analysis of the policy-neutral level in May.

Autor: Martin Gürtler
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