Czech central bank again cuts key interest rate as inflation stays low

PRAGUE  — The Czech Republic’s central bank on Thursday cut its key interest rate for the fifth time in a row as inflation remains low and the economy is showing signs of recovery.

The cut, which had been predicted by analysts, brought the interest rate down by a half-percentage point, to 4.75 percent.

The bank started to trim borrowing costs by a quarter-point on Dec. 21, the first cut since June 22, 2022. Further cuts of half a percentage point each time followed on Feb. 8, March 20, and May 2.

Inflation declined to 10.7 percent in 2023 from 15.1 percent in 2022, according to the Czech Statistics Office, and dropped to the bank’s target of 2 percent year-on-year in February, remaining unchanged in March.

It increased to 2.9 percent in April before dropping to 2.6 percent in May.

The Czech economy was up by 0.2 percent year-on-year in the first quarter of 2024, and increased by 0.3 percent compared with the last three months of the previous year, the figures released by Statistics Office on May 31 said.

That came after the Czech economy contracted by 0.2 percent in the last three months of 2023 compared with a year earlier.

Central banks around the world are leaning toward lowering borrowing costs as they judge whether toxic inflation has been sufficiently tamed.

READ: Europe Central Bank jumps ahead of the Fed in lowering rates

The European Central Bank cut its key interest rate on June 6 by a quarter-point to 3.75 percent from a record high of 4 percent, moving ahead of the U.S. Federal Reserve in lowering rates.

Federal Reserve officials said they saw some progress on inflation on June 12 but said they expect to cut their benchmark interest rate just once this year.