The Czech National Bank raised its two‑week repo rate to 3.75% in June 2026, marking its first rate hike since 2022 and underscoring a continued commitment to tight monetary policy. The decision, taken despite criticism from the prime minister over its dampening effect on lending, was driven primarily by domestic inflation risks. These include accelerated growth in the money supply, first‑quarter wage growth of 8%—the highest in three years—a widening fiscal deficit, and inflationary pressures linked to the Iran War.
Although headline inflation eased to 2.1% in May from 2.5% in April, placing it near the upper end of the bank’s 2% target range, core inflation remained elevated at around 2.9%. At the same time, economic growth is forecast to slow, with activity expected to expand by 2.2% this quarter, down from 2.7% in the previous period.
Higher interest rates are also likely to bolster demand for the koruna. If the central bank signals that additional tightening may be needed to contain inflation, the currency could strengthen further.
