Economic policy / Macroeconomic Indicators, Economic Growth
This section reports on economic policy initiatives of the Czech government, the EU, and other entities that have a direct impact on the competitiveness of the country. It also includes information on economic priorities of the AmCham and other leading associations.
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Key factors that will determine Czech recovery
How the Czech Republic will recover from the pandemic depends on how many moving parts work together. During our General Assembly session, members of the AmCham Board presented major factors that will influence businesses and recovery of the economy.
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June rate hike likely to signal CNB’s readiness to fight inflation
The Czech National Bank (CNB) is likely to raise interest rates next Wednesday. This follows on from statements made by the bank board, indicating that five of the seven board members voted for a rate hike in June. According to the central bankers, inflation remaining above the two-percent target for more than two years is the main reason for early policy tightening. They especially mention a possible adverse impact on inflation expectations. A 25bp increase in June should therefore signal that the CNB is ready to fight higher inflation. However, we do not expect the repo rate to move above 1% at the end 2021.
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Inflation is slowing due to lower food prices
Contrary to expectations, inflation slowed in May and returned to the CNB forecast in year-on-year terms. The main reason for the slowdown in inflation was the fall in food prices. On the other hand, prices of services rose after the easing of anti-epidemic measures, and core inflation accelerated slightly month-on-month. Despite slower headline inflation, speculations about an early increase in CNB interest rates are unlikely to fall significantly.
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