At yesterday’s meeting, the CNB board unanimously decided to leave interest rates unchanged. According to Governor Michl, the CNB is in a favourable position, as monetary policy remains slightly restrictive and inflation is below the central bank’s target. He also stated that the recent rise in energy commodity prices does not pose a significant risk to achieving the inflation target. The governor’s focus on core inflation trends suggests that the CNB may disregard the impact of higher oil prices in its policy. Therefore, a rate hike does not appear to be on the cards. However, persistent inflationary pressures from the domestic economy, compounded by the risk stemming from higher energy commodity prices, argue against a rate cut. Consequently, we are leaving our CNB interest rate forecast unchanged, expecting rates to remain stable until the end of the year.

At yesterday’s meeting, the CNB board unanimously decided to leave interest rates unchanged. According to Governor Michl, the CNB is in a favourable position, as monetary policy remains slightly restrictive and inflation is below the central bank’s target. He also stated that the recent rise in energy commodity prices does not pose a significant risk to achieving the inflation target. The governor’s focus on core inflation trends suggests that the CNB may disregard the impact of higher oil prices in its policy. Therefore, a rate hike does not appear to be on the cards. However, persistent inflationary pressures from the domestic economy, compounded by the risk stemming from higher energy commodity prices, argue against a rate cut. Consequently, we are leaving our CNB interest rate forecast unchanged, expecting rates to remain stable until the end of the year.

As expected, the Czech National Bank left interest rates unchanged yesterday. The key repo rate remains at 3.5%, which is still likely to be slightly restrictive from a monetary policy perspective, given that the policy-neutral level is estimated to be around 3%. This outcome was in line with unanimous analyst consensus and also broadly in line with financial market pricing. All seven members of the CNB board supported the decision to leave rates unchanged.

Persistent inflationary risks, exacerbated by the conflict in the Middle East, have favoured maintaining of stable interest rates. Inflation fell from 1.6% to 1.4% yoy in February, which was below both the 2% target and the central bank’s latest forecast. The CNB had expected inflation to reach 1.6% yoy in February. However, this was mainly due to volatile energy and food prices. Core and services inflation remained above the target in February, reaching 2.7% yoy and 4.5% yoy respectively. This is supported by robust wage growth, which stood at 7.4% yoy in 4Q25, exceeding the CNB’s forecast by 0.3pp. Alongside improving consumer sentiment, household demand is rising too, and we expect it to be the main driver of our predicted 2.7% GDP growth this year. However, the ongoing conflict in the Middle East and the subsequent surge in energy commodity prices are increasing the risk of higher future inflation, underscoring the importance of the central bank exercising caution.

Discussions about tightening monetary policy are probably premature for the CNB. For now, we have only slightly increased our inflation forecast for this year, from 1.6% to 1.8%. This is based on the assumption that the oil shock will be temporary, with no significant second-round effects on other inflation components, and will gradually subside in 2H26, with an average Brent crude price of around USD 85/bbl in 2026. Furthermore, in our updated inflation forecast, the impact of higher oil prices is offset by weaker food price growth at the start of the year than we had expected. Nevertheless, the risks to our forecast remain skewed towards higher inflation this year. The impact of the current energy shock will depend on the duration and intensity of the conflict in the Middle East, a parameter associated with considerable uncertainty. Given the still slightly restrictive monetary policy and low headline inflation, the CNB is now in a relatively comfortable position. This is reinforced by the fact that the economy is likely to be more resilient to energy shocks than before the war in Ukraine. Significant investments in energy efficiency and the growing popularity of fixed-price energy supply contracts have contributed to this. Moreover, the Czech koruna has demonstrated remarkable resilience, weakening by only around 1% against the euro since the outbreak of war in the Middle East.

At a press conference, Governor Michl emphasised the central bank’s favourable position and highlighted the importance of core inflation trends. According to him, this favourable position is linked to the restrictive interest rate level and low inflation. He added that, according to the CNB’s updated forecast, which partially accounts for higher oil prices, headline inflation should remain below 2% this year and close to the target next year. However, core inflation will remain elevated. Governor Michl emphasised several times that core inflation is of primary importance to the central bank, even though other inflation components may temporarily show higher growth. This suggests that the central bank may make an exception for some of the impacts of higher oil prices. According to the governor, it is crucial that higher energy prices do not lead to rising inflation expectations. He noted that the risks to meeting the inflation target are currently roughly balanced, with the macroeconomic impacts of the conflict in the Middle East representing a significant source of uncertainty. Governor Michl also stated that CNB staff analysis indicates that the current impacts of the conflict do not threaten the persistence of the domestic low-inflation environment. He added that the central bank’s next steps would be based on an assessment of new data and the conclusions of analyses.

For now, we are keeping our call for CNB policy unchanged and therefore continue to expect interest rates to remain on hold until the end of the year. The combination of persistent domestic inflationary pressures and rising energy commodity prices means that interest rate cuts are unlikely to be on the CNB board agenda soon. However, based on Governor Michl’s remarks, a rate hike does not appear to be under consideration either. In our view, rate hikes will only be discussed once it is clear that the rise in energy prices is feeding through to other components of inflation. The rise in energy prices itself is external and beyond the control of the central bank. However, the central bank would likely have to respond to second-round effects. The strength of these effects will depend on where and for how long energy commodity prices stabilise and on the strength of domestic demand. The latter will determine the extent to which sellers can pass on increased energy costs to final consumers. Therefore, the current upward trend in consumer demand may complicate matters for the central bank in terms of second-round effects.

We expect Colt CZ’s 4Q25 results to continue reflecting weakness in the U.S. commercial market, which is key for the company. We anticipate consistently strong performance from Colt’s ammunition sector. For 4Q25, we estimate a 17.5% yoy decline in EBITDA to CZK1.3bn. Revenue is expected to be 6.3% lower yoy at CZK6.9bn. For the full year, EBITDA is expected to be CZK4.7bn (+2.9% yoy) on revenue of CZK23bn (+2.8% yoy). This would meet Colt’s full-year goals.

Announcement date: Wednesday, March 25, 2025, before the market

We expect Colt CZ’s 4Q25 results to continue reflecting weakness in the U.S. commercial market, which is key for the company. We anticipate consistently strong performance from Colt’s ammunition sector. For 4Q25, we estimate a 17.5% yoy decline in EBITDA to CZK1.3bn. Revenue is expected to be 6.3% lower yoy at CZK6.9bn. For the full year, EBITDA is expected to be CZK4.7bn (+2.9% yoy) on revenue of CZK23bn (+2.8% yoy). This would meet Colt’s full-year goals.

4Q25 Results: The U.S. civilian market is crucial for the firearms segment. According to available data, the market declined by nearly 13% yoy. It is expected to account for about a quarter of Colt’s total revenue for 4Q25. We anticipate stable performance from the ammunition division. Strong numbers are expected, particularly in Europe. We estimate Colt’s revenue for 4Q25 at CZK6.9bn, a 6.3% yoy decline. EBITDA is expected to reach CZK1.3bn (-17.5% yoy). These figures align with Colt’s guidance of revenue between CZK7-8.5bn and EBITDA between CZK1.1-1.3 bn. We expect the net profit for the fourth quarter of last year to be CZK629m, which is a 1.8% yoy decrease.

2025 Results: We expect full-year revenue to increase by +2.8% yoy to CZK23bn. We estimate EBITDA at CZK4.7bn, a +2.9% yoy increase. Thus, Colt would achieve its revenue target of CZK23–24.5bn and its EBITDA target of CZK4.5–4.8bn.