Policy rate in Czech Republic

The Czech Republic's official interest rate, set by the Czech National Bank (CNB). The main reference is the two-week repo rate, the CNB's key tool for steering monetary policy under a 2% inflation target.

It is not a statistic: the CNB Bank Board decides the level at its scheduled policy meetings, guided by inflation and the economic cycle. The two-week repo rate sets the return on liquidity-absorbing operations.

Its moves pass through to market rates, credit and the Czech koruna (CZK). A hike raises borrowing costs to curb inflation and tends to strengthen the koruna, while a cut cheapens credit to support activity. It is the key gauge of the CNB's policy stance.

It is a discretionary decision that changes only on meeting dates (a step function), and its impact on the real economy works with long and variable lags. The CNB also uses currency interventions that interact with the policy rate.