EMEA Economic Comment "Czechia: CNB hikes by 25bps" Kovacs

Research evidence excerpt

EMEA Economic Comment "Czechia: CNB hikes by 25bps" Kovacs

Global Research

18 June 2026ab

EMEA Economic Comment Economics

EMEA EmergingCzechia: CNB hikes by 25bps

Gyorgy Kovacs

Economist

CNB tightens policy given elevated core inflation and upside risks to inflation gyorgy.kovacs@ubs.com

+44-20-7568 7563

The Czech National Bank (CNB) decided to increase its policy rate, two-week repo rate,

by 25bps to 3.75% - the first rate hike since June 2022. Consensus was fairly evenly split Nimrod Mevorach

Strategistbetween those that expected a 25bps hike and those that called for unchanged rates -

nimrod.mevorach@ubs.com

we were also leaning in the latter direction. The rate hike received near unanimous +44-20-7567 0779

support in the Bank Board (6–1 vote). The Bank Board decided to focus on elevated core

inflation and "a risk of inflation temporarily increasing slightly in late 2026/early 2027",

which prompted the CNB to respond. The Board's statement argues that it "requires

relatively tight monetary policy" to " maintain inflation near the 2% target in the long

term". Policy guidance remained cautious, with CNB Governor Michl indicating that the

Board would evaluate the persistence of the low-inflation environment and the degree

of policy restrictiveness at upcoming meetings, leaving future policy decisions data

dependent and having all options on the table.

Key drivers behind the rate hike

The Board highlighted the following factors as reasons for the policy rate hike. First, core

inflation remains elevated ay 2.9% y/y in May (same as in April), with no evidence of

easing in underlying price dynamics. Second, accelerating money supply growth (5.7%

y/y in April), driven by credit growth and public borrowing. Third, wage dynamics remain