A smaller number of analysts predicted that the central bank would relax and the interest rate would drop by only a quarter of a percentage point. But that didn’t happen in the end. The prime rate is now the lowest since May 2022.
“Deposit interest rates will decrease in line with the decline in the CNB’s main rate, which already indicates the development of deposit rates with agreed maturity, both for households and companies – they are currently the lowest since mid-2022 and from their highest values in in the middle of last year, they fell by roughly one percentage point,” said Jakub Seidler, Chief Economist of the Czech Banking Association.
According to him, the CNB’s decision will not have a noticeable effect on mortgages. “However, this information is already contained in the longer rates, on the one hand, these mentioned rates have been significantly affected in recent weeks by global developments and, in particular, by the market’s re-evaluated expectations regarding the speed of the rate cut by the Fed (US central bank),” Seidler reasoned.
At the same time, he added that, on the other hand, longer interbank rates, which are key for mortgage rates, “increased by almost one percentage point in recent weeks, and are thus the highest since the turn of November and December of last year.”
On Thursday, the Banking Council of the CNB also decided to reduce the other two rates to the same extent: the Lombard rate is now 6.25 percent and the discount rate is 4.25 percent.
The Lombard rate is the percentage rate at which commercial banks can borrow money from the central bank against securities. For example, penalties for defaulted loans are linked to the discount rate.
Analysts: Market rates have been rising in recent weeks, which threatens to make loans more expensive
Economy
