The Czech central bank raised its key interest rate on Thursday, as expected, after holding fire in the previous session in December, amid high inflation and strong growth.
The Bank Board increased the two-week repo rate by 25 basis points to 0.75 percent, the Czech National Bank said. The bank also increased the Lombard rate by 50 basis points to 1.50 percent, while it kept the discount rate unchanged at 0.05 percent.
The previous change in the rate was a quarter-point hike in November last year. In August, the bank had raised the key rate by 20 basis points, which was the first hike since February 2008 and the first change in interest rates since November 2012, when the repo rate was cut to technical zero.
The CNB had abandoned a three-and-a-half-year long ceiling on the appreciation of the koruna in April last year.
The CNB Governor Jiri Rusnok is set to hold a press conference later on Thursday. The bank will also release its latest macro economic projections.
Capital Economics expect that the policy rate will be raised by more than the markets anticipate over the rest of this year. The firm expects the press statement to be fairly neutral.
The firm's economist Liam Carson said mounting wage pressures mean inflation will turn out to be stronger than the National Bank currently anticipates.
"We think that there will be a further 100 basis points of hikes in the policy rate this year, taking it to 1.75 percent by end-2018," Carson said.
by RTT Staff Writer
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