As expected, the CNB raised its two-week repo rate by 25bp to 0.50% at its June meeting, with four of the bank’s board members voting in favour, another calling for a 50bp increase and the remaining two preferring continued rate stability. Persistently high inflation and significantly reduced uncertainty around the pandemic were the main reason for the rate hike. Inflation has remained above the CNB’s 2% target for more than two years, which could have an adverse effect on inflation expectations. Moreover, current economic trends are pro-inflationary. Governor Rusnok said at the press conference that, if necessary, the CNB is ready to increase interest rates at each subsequent monetary policy meeting. However, he currently does not think this will be the case. We expect two more hikes this year pushing the repo rate up to 1% at the year-end.