PRAGUE (Reuters) -The Czech National Bank (CNB) left interest rates steady on Thursday, as widely expected, keeping policy on hold for a fourth meeting in a row as an easing cycle ran out of steam on inflation risks from services and wages.
The bank last cut rates in May to bring its main two-week repo rate to 3.50%, part of a series of cuts totalling 350 basis points since the end of 2023.
Policymakers have been cautious about cutting any further with service price inflation still running close to 5% and wages picking up in a rebounding economy.
An election last month is also bringing in a new government promising looser fiscal policy that can give a short-term boost to growth, as well as inflation.
The majority of analysts in a Reuters poll on Friday forecast unchanged rates for the rest of 2025 and throughout 2026, although some see chances of the economy underperforming and opening up space for further easing.
Central bank Governor Ales Michl is due to comment on the bank’s decision at 3 p.m. (1400 GMT). The bank will also release updated economic forecasts.
The Finance Ministry earlier on Thursday raised its 2025 and 2026 forecasts – to 2.4% and 2.2% respectively – as wages are seen rising more than previously expected.
Central bankers have cited wage growth among the main price risks. Wages sank in real terms during a 2022-2023 inflation surge but are now rebounding, rising more than 5% in the second quarter when factoring out inflation.
Headline inflation picked up to 2.5% last month, staying in the top part of the bank’s 1 percentage point tolerance band around its 2% target.
The bank in August forecast inflation returning to target in 2026 and for growth to reach 2.6%.
The new outlook may show slightly slower growth and inflation than previously expected, according to Vice Governor Eva Zamrazilova, who told Reuters last month that rates should stay on hold at least until the year-end and possibly longer.
(Reporting by Jan Lopatka and Jason Hovet; Editing by Emelia Sithole-Matarise)
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