Interest rates in the Czech Republic should head down quickly this year, they should reach below four percent, said economist David Marek

Interest rates in the Czech Republic should head down quickly this year, according to the model example, they should reach below four percent, or close to three percent. David Marek, Deloitte’s chief economist and adviser to the president, said this at today’s expert debate organized as part of the Czech elite – the most valuable Czech companies project.

According to him, the question of how quickly and how sharply interest rates will go down concerns not only the Czech National Bank, but also the European Central Bank and the American Fed. “However, the Czech National Bank should be the most vigorous in reducing rates, because the local macroeconomic outlook requires it,” he said in connection with the stagnation of the domestic economy.

“There is great uncertainty as to how quickly rates will go down,” agreed former CNB Governor and IRQ Funds founder Zdeněk Tůma. According to him, this year will mainly be about finding an economic balance. The CNB’s more cautious approach to reducing rates is related to its concerns about a significant weakening of the koruna exchange rate, which could occur in this case, he noted.

Last Wednesday, the Banking Council of the Czech National Bank reduced the base interest rate by half a percentage point to 5.75 percent. The CNB started easing its monetary policy last December, when in the first step it lowered the base interest rate by a quarter of a percentage point to 6.75 percent. Before that, rates were unchanged at seven percent for a year and a half. In February of this year, the CNB accelerated its rate reduction, when it went for a decrease of half a percentage point.

Last week, CNB Governor Aleš Michl did not want to predict what the new equilibrium level of the basic interest rate would be. According to him, the Banking Council is discussing this, and should have the first detailed analysis in May. Michl only said in general terms that rates will be at a higher level than before the covid-19 pandemic.

Photo: CTK Depositphotos

Author: ČTK