Czech central bank expected to raise interest rate to 4 percent Thursday

The Czech National Bank is expected to raise its benchmark interest rate to 4 percent Thursday, Nov. 5, as analysts warn that domestic price pressures and rising energy costs warrant tighter monetary policy.

Economists contacted by ČTK unanimously forecast a quarter-percentage-point increase from the current 3.75 percent. Central bank board member Jakub Seidler also leaned toward an increase in an interview with Reuters last week.

The decision would follow June’s quarter-point rise, the bank’s first increase in four years. Attention will also turn to its new economic forecast and indications of whether further increases could follow.

Although overall inflation remains relatively close to the central bank’s 2 percent target, analysts say the underlying picture is less reassuring.

Core inflation, which excludes volatile items, rose above 3 percent in September. Service prices continue to increase at an annual pace well above 4 percent, while price growth for goods has also accelerated, according to Portu chief economist Jan Berka.

Higher energy prices, resilient consumer demand and continuing wage growth are adding to those pressures, he said.

UniCredit Bank analyst Martin Komrska described a quarter-point increase as the most likely outcome, arguing that inflation risks had accumulated during the second half of the year.

Domestic inflationary tendencies were already elevated independently of developments in the Strait of Hormuz, he added.

Czech Banking Association analyst Jaromír Šindel also expects an increase. He said the central bank faces persistent inflation pressures within the Czech economy alongside the geopolitical effects of higher energy prices, while looser government fiscal policy complicates its task.

Financial markets have largely anticipated the increase, Berka said, meaning the rate decision itself may attract less attention than the bank’s assessment of what comes next.

Investors will scrutinize the new macroeconomic forecast and the board’s comments for signs of whether it considers further tightening necessary.

FinGo specialist Jana Vaisová also forecasts a rise to 4 percent, pointing to strong mortgage demand, wage growth and increasing energy prices.

However, she views a potential November increase as a preventive adjustment rather than the beginning of a sustained series of rate rises.

Mortgage lenders have already been increasing their rates for several weeks, independently of the central bank’s next decision, Vaisová noted. Borrowers seeking a new loan or refinancing are therefore encountering more expensive offers before Thursday’s meeting.

The distinction matters for households: the anticipated quarter-point increase is a forecast for the central bank’s benchmark rate, rather than an announced change to every mortgage. The board will make its decision Thursday, alongside its updated outlook for the Czech economy.