Czech National Bank (CNB) Keeps Interest Rates Steady at 3.75%

This cautious move comes as inflation risks remain high, and global economic uncertainty continues to grow.

The Czech National Bank (CNB) has kept interest rates at 3.75% on Thursday, pausing its easing cycle again after two reductions over the past three months amid high inflation risks and global economic uncertainty.

The bank is now more cautious after cutting rates aggressively last year, striking a balance between boosting growth and keeping inflation at bay.

Although consumer price growth has slowed, it remains at the higher end of the bank’s 2% to 3% target range. Service costs are rising, and strong wage growth continues to put pressure on prices. Food prices are also a major concern.

After facing a period of double-digit inflation, Czech consumers are still highly sensitive to rising costs, which could influence overall inflation expectations.

At the same time, the CNB is monitoring global risks such as new U.S. tariffs that could trigger trade wars, affecting exports and slowing economic growth.

Moreover, increased defense spending across Europe, signaled by Germany’s move to expand government borrowing, presents additional inflationary risks. These external factors make it difficult for the CNB to proceed with further rate cuts without careful consideration.

While the bank is holding rates for now, another reduction could be seen as early as May, according to market expectations.

By then, new economic forecasts will provide better insight into inflation trends and overall economic stability, which will be crucial for the bank’s decision.

Some experts believe that rates may eventually settle between 3.00% and 3.50%, aligning with the so-called “neutral” level that policymakers have previously indicated.

This would offer optimal stimulation to the economy without overheating it or pushing inflation out of control.

However, considering the pressing macroeconomic issues and the urgency to control inflation, another rate reduction seems unlikely before the bank convenes again in May.

The CNB's decision to pause rate cuts could have implications for crypto markets. With inflation risks remaining high and global uncertainty increasing, investors might prefer investing in Bitcoin and other digital assets as an inflation hedge.

A delayed rate cut could also slow the flow of liquidity into risk assets, impacting short-term crypto price movements.