Czech Economics: CNB delivers first rate hike in four years, signals higher-for-longer rather than a new hiking cycle

Research evidence excerpt

Czech Economics: CNB delivers first rate hike in four years, signals higher-for-longer rather than a new hiking cycle

Czech Economics

18 June 2026 Citi Research

At today’s meeting, the CNB Bank Board raised the policy rate by 25 basis points

to 3.75%, in line with both the Citi forecast and market expectations, marking

the first interest rate increase in four years. The decision was not unanimous,

with one Board member voting to keep rates unchanged. The reasons behind our

expectation of a rate hike in the Citi forecast were discussed in greater detail in our

previous report: Inflation eases near the 2% target, but a June CNB hike appears

increasingly likely. Looking ahead, a possible follow-up rate increase in August will

depend on a wide range of factors and incoming data, as outlined in the CNB’s

policy statement. In our view, despite the sharp decline in oil prices in recent days,

the key factor behind today’s rate increase was the still-persistent domestic

inflationary environment. Accelerating credit growth and debt-financed public

spending continue to contribute to growth in the money supply. At the same time,

the labor market remains tight, as reflected in robust wage growth. Price pressures

remain particularly pronounced in the services sector, which represents a

substantial share of core inflation. Household consumption is also increasing.

Elevated house price growth continues to exert upward pressure on inflation.

Consequently, as expected, the Bank Board once again assessed the risks and

uncertainties surrounding the inflation outlook as being tilted to the upside.

Although an additional rate hike in August cannot be completely ruled out at this

stage, we continue to believe that today’s move does not represent the

beginning of a prolonged hiking cycle.