PRAGUE, Aug. 1 (Xinhua) -- The Czech National Bank (CNB) cut all three interest rates again on Thursday, by the same quarter percentage point.
The base rate, on which interest on bank deposits and loans is based, has thus fallen to 4.5 percent, the lowest level since the beginning of February 2022.
The Lombard rate, at which commercial banks borrow from the CNB, was lowered to 5.5 percent. The discount rate, which covers, for example, penalties on non-performing loans, was adjusted to 3.5 percent.
All seven members of the CNB Bank Board voted in favor of these decisions. "The decision is based on the new macroeconomic forecast," said CNB Governor Ales Michl.
In its latest macroeconomic forecast published on Thursday, the CNB predicts the country's gross domestic product (GDP) to grow by 1.2 percent this year, lower than its May forecast of 1.4 percent. However, it expects the economy to accelerate next year, with GDP growth expected to reach 2.8 percent.
The CNB started easing monetary policy last December, when it cut the base interest rate by a quarter of a percentage point to 6.75 percent in the first step. Before that, rates had been unchanged at seven percent for a year and a half. In February this year, the central bank accelerated the rate cut, when it resorted to a half-percentage point drop, and then repeated the same move three times.
The slowdown in monetary policy easing after four previous rate cuts of half a percentage point is in line with financial market expectations, local media reported.
The Bank Board also confirmed its determination to continue its tight monetary policy in order to stabilize inflation near the 2 percent target in the long term, it said in a statement.
Price stability has been restored in the country, and inflation has been close to the 2 percent inflation target since the beginning of this year, the bankers said in the statement. Still, they said "the fight against inflation is not over."
"The Bank Board still sees some inflationary pressures in the economy. A strengthening of those pressures would mean that inflation would diverge for longer from the target towards the upper boundary of the tolerance band in the quarters ahead. Therefore, the Bank Board considers it necessary to persist with tight monetary policy and carefully consider any further rate cuts, approaching them with great caution," it said.
