By Czech Central Bank (CNB) maintained its policy rate at 4.00% on Thursday, pausing its recent sequence of rate cuts, which leads Capital Economics to forecast a resumption of the easing cycle, anticipating a decrease in rates to 3.00% by the end of next year.
The decision to hold rates steady aligns with predictions from analysts, including those at Capital Economics. This pause is the first since the CNB initiated a series of rate reductions totaling 300 basis points since December 2023.
Central bank officials have indicated a more cautious approach to future monetary easing as the policy rate nears the estimated neutral level of 3.00-3.50%.
Despite the current halt, the outlook for inflation is positive, with expectations for continued rate cuts in 2025. Inflation has consistently been within the central bank’s target range of 1.0-3.0% throughout the year.
Capital Economics projects that this trend will persist into the next year, leading to an additional 100 basis points in rate cuts distributed over the year, culminating in a policy rate of 3.00% by the end of 2025.
The anticipated policy adjustments are expected to position Czechia among the few emerging markets (EMs) to return to a neutral monetary policy stance.
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