The Czech Central Bank (CNB) left its policy rate unchanged at 4.00% on Thursday, halting a series of recent rate cuts, with Capital Economics predicting a resumption of the easing cycle and forecasting a rate cut to 3.00% by the end of next year. . Year.
The decision to keep interest rates steady is consistent with forecasts from analysts, including Capital Economics. The pause is the first since the CNB began a series of interest rate cuts totaling 300 basis points since December 2023.
Central bank officials have signaled a more cautious approach to future monetary easing as policy rates move closer to the estimated neutral level of 3.00-3.50%.
Despite the current pause, the inflation outlook is positive and continued interest rate cuts are expected in 2025. Inflation remained steadily within the central bank’s target range of 1.0% to 3.0% throughout the year.
Capital Economics expects this trend to continue next year, resulting in a further 100 basis points of interest rate cuts per year, with the policy rate expected to reach 3.00% by the end of 2025.
The expected policy adjustments are expected to position the Czech Republic as one of the few emerging markets (EMs) to return to a neutral monetary policy stance.
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