The Czech National Bank (CNB) bank board took the markets by surprise, raising interest rates by 0.25 percentage points. The repo rate now stands at 2.25 %, the discount rate at 1.25 %, and the Lombard rate at 3.25 %.
The CNB last raised the rates in 2001.
The CNB's decision is surprising but the markets had expected the CNB would raise rates by September at the latest. According to the analysts, the CNB hopes the higher interest rates will help fight rising inflation. Central bankers fear that Czech economic growth could peak in the next several months. The rate hike is intended to prevent future growth of consumer prices during the economic slowdown that would result from the economy exhausting its full production potential.
Analysts say the rate hike will have a major impact on the corporate sector, with more expensive loans and higher appreciation of bank deposits.
