The Czech Republic’s central bank has announced its fourth consecutive cut to the key interest rate in response to a drop in inflation and positive signs of economic recovery. Preliminary figures released by the Czech Statistics Office show that the economy grew by 0.4% year-on-year in the first quarter of 2024, following a 0.2% contraction in the last quarter of 2023.
The half-percentage point cut brings the interest rate down to 5.25%, a move that was anticipated by analysts. This series of interest rate cuts began in December 2022 with a quarter-point reduction, followed by subsequent cuts of a half-percentage point each in February and March of 2023. Inflation in the Czech Republic has decreased from 15.1% in 2022 to 10.7% in 2023, with the rate hitting the bank’s target of 2.0% year-on-year in February and remaining steady in March.
Central banks worldwide, such as the U.S. Federal Reserve and the European Central Bank, assess whether inflation has reached a manageable level that would allow for rate cuts. While the European Central Bank has left its key rate benchmarks unchanged, the U.S. Federal Reserve has indicated a cautious approach, stating that it will only consider cutting interest rates once it is confident that inflation is slowing towards its 2% target
