Economy
Czech Inflation Is Near Target. The CNB Still Isn't Relaxing
Prague — Czech inflation is back around the central bank's target and the economy is growing. The message from policymakers, however, is that the final part of the inflation fight may be the hardest.
By Czech Business Review Editorial Team · Editorial Team · Published
On paper, the Czech National Bank should be enjoying a relatively comfortable summer. Its latest forecast expects average inflation of 2.0% in 2026, exactly in line with the bank's target. GDP is forecast to grow 2.2% this year before accelerating to 2.7% in 2027. The koruna is expected to remain broadly stable, with the CNB forecasting an average CZK/EUR rate of 24.3 this year.
Yet at its August meeting, the Bank Board kept the two-week repo rate at 3.75%. The reason is visible beneath headline inflation.
Services and wages are the uncomfortable part
The central bank does not appear particularly worried about another broad inflation shock of the sort experienced earlier in the decade. Its concern is more domestic. The August meeting minutes described the risks surrounding the inflation outlook as inflationary overall and emphasised persistent price pressure generated inside the Czech economy.
That makes wages and services particularly important. Goods inflation can fall quickly when energy or global supply conditions improve. Service prices are often stickier because labour represents a larger proportion of costs.
A tight labour market therefore creates a difficult policy combination: good news for household incomes, but a reason for the central bank to be cautious about cutting rates too quickly. The bidding for senior technical staff documented in our reporting on the Czech AI talent war is one visible corner of that pressure.
Businesses should not plan for cheap money
The CNB's own forecast points toward broad stability in short-term market interest rates, with three-month PRIBOR averaging 3.7% in 2026 and 3.9% next year. That is a meaningful message for businesses.
The Czech economy may be past the emergency inflation phase, but the return to very low interest rates is not part of the central bank's baseline. Companies assessing property purchases, expansion projects or debt refinancing therefore have little reason to build their plans around a dramatic fall in financing costs.
The more rational assumption is that borrowing remains relatively expensive by pre-inflation standards. That arithmetic is already shaping capital budgets at the banks investing quietly in automation.
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Stability may be the real achievement
There is a temptation to view an unchanged interest-rate decision as no news. In this case, it is almost the opposite. Czech monetary policy is moving from crisis management toward a period where the central bank can hold rates, observe domestic price pressure and avoid chasing every monthly inflation print.
The latest Monetary Policy Report expects inflation to remain near 2% this year, temporarily rise toward 3% at the beginning of 2027 and subsequently move back toward target.
For Czech businesses, that is not the same thing as cheap capital. It may be something more useful: a macroeconomic environment that is becoming predictable again.