The Czech National Bank (CNB) lifted its benchmark rate to 4% in a divided vote, pairing tighter policy with a weaker 2026 growth outlook and faster projected inflation in 2027.
On Nov. 5, four board members backed a 0.25 percentage-point increase in the two-week repo rate, while three favored holding it steady. The discount rate rose to 3% and the Lombard rate to 5%; all three changes took effect Nov. 6. The move matched ING’s forecast ahead of the meeting.
The CNB’s Autumn 2026 forecast puts economic growth at 1.7% this year, down from its previous 2.2% projection. It sees growth at 2.5% in both 2027 and 2028. Average inflation is projected at 2.1% in 2026, 3.2% in 2027 and 2.3% in 2028.
Inflation had stayed close to the CNB’s 2% target since January 2024, according to the bank. Its latest outlook anticipates a temporary rise in late 2026 and early 2027. The board cited elevated core and services inflation, rapid wage growth, credit expansion, public spending and property prices as risks. It said the increase was intended to limit the chance that higher energy costs spread into other prices.
ING Chief Economist for the Czech Republic David Havrlant and EMEA FX and Fixed-Income Strategist Frantisek Taborsky said softer economic activity could restrain further increases. They characterize 4% as a new neutral level; the CNB has not identified it as its official neutral rate. The analysts also questioned whether a projected decline in short-term rates would be warranted if inflation stayed above target while growth remained near potential.
The CNB’s forecast table puts the three-month Prague Interbank Offered Rate (3M PRIBOR) average at 3.6% in 2028, following 4.1% in 2027. ING reads the market-rate outlook as reaching about 4.5% in the near term before easing to roughly 3.5% by late 2028. Those figures describe a market rate, not a stated path for the CNB’s policy rate.
CNB Gov. Aleš Michl said the board would assess the effects of its June and November increases before deciding on another step. The next scheduled monetary policy meeting is Dec. 17.
