The Czech National Bank (CNB) surprised the market with another 25 bp rate cut. The CNB's board decided to cut the repo rate by 0.25 % to 2.00%, the discount rate to 1.00% and the Lombard rate to 3.00%.
The reduction brings interest rates to an all-time low. The CNB last cut rates by 25 bp at the end of June. The central bank has been gradually cutting rates since autumn 2001.
Last week, Finance Minister Bohuslav Sobotka said he would welcome an additional 25 bp interest rate cut in light of the low level of inflation and the upcoming fiscal consolidation.
"The cut comes as a surprise, as the CNB was not expected to cut rates before September or October," says Commerzbank Capital Market's Radomir Jac. The cut is most likely related to the new inflation and gross domestic product (GDP) forecast issued by the CNB, he added.
