Czech Central Bank Ups Key Rate Again Amid High Inflation

The Czech Republic´s central bank has increased its key interest rate by a quarter-point to 0.75% to tackle inflation amid the economy´s rebound from the coronavirus pandemic.

It was the second such increase in about two months.

In June, the Czech National Bank raised key interest rates, by 0.25 percentage points to 0.5 percent. Analysts say the main reason is fears of rising inflation related to the ongoing economic recovery, and the market expects two more rate increases this year.

Analysts had predicted Thursday´s move, and a member of the bank´s board had indicated that the rate might be hiked further later in the year as the bank considers high inflation as a major threat.

The increase in the key rate will inevitably lead to a further rise in the cost of consumer goods and mortgage loans. How abruptly this happens depends on the strategy of each particular bank.

Inflation reached 2.8% in June, above the bank´s 2% target, as the economy registered a record 7.8% year-on-year growth in the second quarter.