Central Bank holds fire in November

Two-week repo rate remains unchanged: On 6 November, the Czech National Bank (CNB) stood pat, leaving its two-week repo rate unchanged at 3.50%—the lowest level since late 2021—for a fourth consecutive meeting, matching market expectations. The CNB’s cautious decision to hold was unanimous, suggesting that the loosening cycle that started in late-2023, which has seen the two-week repo rate halve, may be coming to an end.

Cautious stance required to tame inflation: The CNB cited a tight labor market, rising wages, stronger household demand and elevated services inflation as the drivers for the hold. The CNB held fire in a bid to contain inflation as risks persist in the form of faster credit growth among households and the government, wage hikes and rising cost pressures for services and housing.

CNB likely to stand pat through 2026: While the CNB suggested that all options remain on the table, the Bank’s new baseline scenario points to broad stability in the coming quarters. A majority of our panelists expect the CNB to stand pat through year-end, yet a small minority have penciled in a final 25 basis point cut at December’s final meeting of 2025. In 2026, our panel is split between further easing and the Bank standing pat. Future decisions will hinge on the strength of the koruna. The health of the Czech Republic’s top trading partner, Germany, is also key to monitor. The Bank will reconvene on 18 December.

Panelist insight: Commenting on the outlook, David Havrlant, chief economist at ING, stated: “Czech headline inflation reached a low point in August, dragged down by monthly food and fuel price declines. Meanwhile, core inflation remained elevated, reinforcing the case for rate stability when looking ahead. A longer-term horizon suggests upward risks to both inflation and rates.”

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