The Czech Republic's central bank announced on Thursday that it has reduced its key interest rate for the fourth consecutive time, citing a decrease in inflation and positive economic indicators. The interest rate was cut by half a percentage point, bringing it down to 5.25%. This move was in line with analysts' expectations.
The central bank initiated the series of rate cuts with a quarter-point reduction on December 21, 2022, marking the first cut in several months. Subsequent cuts followed, with a half-percentage point reduction on February 8 and another half-percentage point cut on March 20.
Inflation in the Czech Republic dropped from 15.1% in 2022 to 10.7% in 2023, according to data from the Czech Statistics Office. In February, inflation stood at 2.0% year-on-year, meeting the central bank's target, and remained steady at the same level in March.
Preliminary figures released by the Statistics Office indicated that the Czech economy grew by 0.4% year-on-year in the first quarter of 2024 and by 0.5% compared to the previous quarter. This growth followed a contraction of 0.2% in the final quarter of 2023 compared to the same period a year earlier.
The Czech central bank's decision to cut interest rates aligns with global trends, as central banks worldwide, including the U.S. Federal Reserve, assess whether inflationary pressures have eased sufficiently to warrant rate cuts. While the European Central Bank maintained its key rate benchmarks at a record high of 4% in April, it signaled a potential rate cut at its upcoming meeting in June.
In contrast, the U.S. Federal Reserve emphasized its concerns about persistent high inflation and indicated that it does not plan to reduce interest rates until it is confident that price increases are slowing sustainably towards its 2% target.
