Interest rates on bank deposits and loans depend on central bank rates. For businesses, higher interest rates bring more expensive loans for investment and operation, more expensive housing loans for households. At the same time, however, with higher interest rates, the appreciation of deposits on accounts increases.
So mortgages will now become a little cheaper. However, CNB Governor Aleš Michl announced in the Players order on Blesk.cz that super cheap mortgages will not return under his tenure.
“My philosophy is to make sure it doesn’t happen again. In the last 20 years, interest rates in the Czech Republic have been below inflation. Spending was encouraged, the GDP grew nicely, the economy too, but we were still in debt. My logic is the opposite: higher interest rates, savings, work. Economic growth will be lower, but it will be much healthier,” said Michl.
“Today’s reduction in CNB interest rates is completely in line with the expectations of the analytical community,” said Generali Investments analyst Radomír Jáč. According to him, the reduction of interest rates by half a percentage point may lead to a slightly negative reaction of the exchange rate of the koruna. It can be assumed that the CNB will reduce interest rates at the next meetings as wellwhich will lead to a decrease in interest rates of domestic banks, both for deposits and loans, he added.
Traditionally, today’s decision will have the fastest impact on the market for those products whose interest rates are most closely tied to the CNB’s short-term rate, added Czech Banking Association analyst Jakub Seidler. He thus expects a further drop in interest rates for corporate loans. According to him, the rates for deposits will also decrease in line with the decrease in the main rate of the CNB.
The CNB started the decline in interest rates 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, and repeated the same step at the March meeting.
