PRAGUE (Reuters) – The Czech National Bank (CNB) on Thursday raised its main interest rate by 50 basis points to 5.00%, bringing it to the highest level since 2001 as expected as policymakers battle an inflation surge exacerbated by the Ukraine war.
The central bank has raised its main rate by 475 basis points since last June and has been among the most aggressive in central Europe in policy tightening to battle surging inflation, which hit a 24-year high of 11.1% in February.
Price pressures are still building, spurred on by rising energy costs following Russia’s invasion of Ukraine.
The central bank has said inflation would rise more while Governor Jiri Rusnok has said inflation shocks combined with the war in Ukraine could bring growth to zero by the end of the year.
The economy grew 3.3% in 2021, and the central bank forecast a 3.0% rise in 2022 in its last macroeconomic outlook in February, before fighting began in Ukraine.
Rusnok was due to comment on the rate decision at 3:45 p.m. (1345 GMT) at a news conference where he will also present the board’s assessment of risks to current forecasts.
He may also detail the board’s debate about using the bank’s large international reserves, which stood at about 64% of gross domestic product in February, to fight inflation and not just as a tool to stabilise exchange rate fluctuations.
The bank announced on March 4 it had intervened in markets after the crown had weakened sharply with other currencies in central Europe amid the fallout from the Ukraine conflict.
The crown has steadied since and traded up 0.35% at 24.360 to the euro on Thursday, around levels seen before the conflict started.
(Reporting by Jason Hovet and Robert Muller)
