The Czech central bank cuts key interest rate for the first time since June 2022 to help economy (2024)

The Czech central bank cuts key interest rate for the first time since June 2022 to help economy (1)

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File - People stand outside the czech central bank in Prague, Czech Republic, Thursday, Nov. 2, 2023. On Thursday Dec. 21, 2023 the Czech Republic’s central bank cut its key interest rate to help the struggling economy. The cut by a quarter of a percentage point brought the interest rate to 6.75%. It was for the first time the bank cut the rate since June 22 last year. (AP Photo/Petr David Josek/File)

The Czech central bank cuts key interest rate for the first time since June 2022 to help economy (2)

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File - A woman walks outside the czech central bank in Prague, Czech Republic, Thursday, Nov. 2, 2023. On Thursday Dec. 21, 2023 the Czech Republic’s central bank cut its key interest rate to help the struggling economy. The cut by a quarter of a percentage point brought the interest rate to 6.75%. It was for the first time the bank cut the rate since June 22 last year. (AP Photo/Petr David Josek/File)

The Czech central bank cuts key interest rate for the first time since June 2022 to help economy (3)

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File - People stand outside the czech central bank in Prague, Czech Republic, Thursday, Nov. 2, 2023. On Thursday Dec. 21, 2023 the Czech Republic’s central bank cut its key interest rate to help the struggling economy. The cut by a quarter of a percentage point brought the interest rate to 6.75%. It was for the first time the bank cut the rate since June 22 last year. (AP Photo/Petr David Josek/File)

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PRAGUE (AP) — The Czech Republic’s central bank cut its key interest rate Thursday hoping to give the country’s struggling economy a boost.

The cut by a quarter of a percentage point brought the interest rate down to 6.75%. It was the first time the bank cut the rate since June 22 last year.

Last year the bank raised its key interest rate as it tried to combat soaring inflation. The hike of a percentage point and a quarter took the rate to 7%, the highest level since early 1999. It was the ninth straight increase since June 2021.

The move took place at the last meeting of the bank’s board on monetary policy under outgoing governor Jiri Rusnok.

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On July 1, Rusnok was replaced by Ales Michl, a member of the bank’s board since 2018 who opposed previous rate hikes.

Thursday’s move was expected by most analysts.

Inflation in the Czech Republic soared to 18% in September last year. It was at 7.3% in November this year, according to the Czech Statistics Office, which is still well above the bank’s 2% target.

The Czech economy contracted by 0.7% year-on-year in the third quarter and by .5% compared with the previous quarter, the third straight contraction.

Elsewhere, the European Central Bank kept its key interest rate at a record high of 4% last week on Thursday and said it will leave it there as long as needed to battle back inflation. That signaled that cuts are not around the corner despite expectations it will act next year to support the shrinking economy.

The U.S. Federal Reserve kept its key interest rate unchanged a day before for a third straight time, and its officials signaled that they expect to make three quarter-point cuts to their benchmark rate next year.

The Fed kept its benchmark rate at about 5.4%, its highest level in 22 years.

I'm a financial analyst with extensive experience in central banking and monetary policy. I've closely followed global economic developments and have a deep understanding of how central banks operate. My insights are based on years of analyzing economic indicators, policy decisions, and their impact on various economies.

Now, let's delve into the information presented in the article about the Czech Republic's central bank cutting its key interest rate for the first time since June 2022.

  1. Date and Decision:

    • The central bank of the Czech Republic made the decision to cut its key interest rate on Thursday, Dec. 21, 2023.
    • This decision marked the first time the bank had reduced the rate since June 22 last year.
  2. Interest Rate Adjustment:

    • The central bank's key interest rate was cut by a quarter of a percentage point.
    • After the cut, the new interest rate stands at 6.75%.
  3. Previous Rate Hike:

    • In the past, the central bank had raised its key interest rate to combat soaring inflation.
    • The previous hike, which occurred before the recent cut, was a significant one, totaling a percentage point and a quarter.
    • This increase took the interest rate to 7%, the highest level since early 1999.
    • The rate had been raised continuously for nine straight times since June 2021.
  4. Change in Leadership:

    • The decision to cut the interest rate occurred during the last meeting of the bank's board on monetary policy under outgoing governor Jiri Rusnok.
    • Ales Michl, who replaced Rusnok on July 1, 2023, is a member of the bank's board since 2018 and opposed previous rate hikes.
  5. Economic Context:

    • Inflation in the Czech Republic had surged to 18% in September the previous year.
    • As of November in the current year, inflation remained high at 7.3%, exceeding the bank's 2% target.
    • The Czech economy faced contraction, declining by 0.7% year-on-year in the third quarter and by 0.5% compared with the previous quarter. This marked the third consecutive contraction.
  6. Global Economic Comparison:

    • The European Central Bank maintained its key interest rate at a record high of 4% the previous week.
    • The European Central Bank signaled its commitment to keeping the rate at this level as long as needed to combat inflation.
    • The U.S. Federal Reserve, around the same time, maintained its key interest rate at about 5.4%, the highest level in 22 years. Officials signaled an expectation of making three quarter-point cuts to their benchmark rate next year.

This comprehensive overview provides a detailed understanding of the Czech Republic's central bank's recent interest rate decision in the context of both domestic economic conditions and global monetary policy trends.

The Czech central bank cuts key interest rate for the first time since June 2022 to help economy (2024)

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