The Czech National Bank raised its key interest rate by 50 basis points to its highest level since 2001 on Thursday and said it was ready to tighten its policy further to keep inflation expectations steady as the war in Ukraine pushes prices higher.
The central bank board voted 5-2 to raise the two-week CZCBIR = ECI repo rate to 5.00%, while two policymakers chose to keep interest rates stable. The Czech Republic has raised that rate by 475 basis points since last June in one of the most aggressive tightening campaigns.
Inflation in the country rose to more than two decades, at 11.1%, in February, due to strong consumer demand, rising wages and rising input costs for businesses.
Russia’s invasion of Ukraine has boosted price pressures by raising energy and commodity prices, while causing a downward revision in growth forecasts.
Central Bank Governor Jiri Rusnok said the conflict would halve this year’s economic growth from the 3.0% forecast in the previous forecast.
He also said the board is ready to continue raising interest rates to prevent inflation expectations from deviating from the bank’s 2% long-term target.
He said policymakers discussed a bigger increase, but the majority compromised with the 50-unit base move.
“We will adjust if necessary, if the new data shows that,” Rusnok said.
Source: Capital
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