Basic information on interest rates announced by the Czech National Bank (the CNB Banking Council today reduced the basic interest rate by half a percentage point to 5.25 percent):
– By setting the base interest rate, the central bank influences the development of interest rates in the economy. The amount of CNB interest rates is also one of the factors that influence the exchange rate of the koruna against foreign currencies. For the announced rate, the Czech National Bank takes over surplus funds from commercial banks during so-called repo operations, which it returns to them plus interest. By default, these are two-week deals, in some cases transactions with a maturity period of less than 14 days are also carried out. In addition to these longer-term deals, the central bank allows banks to deposit excess money with it overnight.
– For both types of transactions – i.e. for two-week repo operations (2T repo rate) and for depositing money overnight (deposit facility, discount rate) – the Czech National Bank has set an interest rate of 0.05 percent since November 2012. In August 2017, it increased the two-week rate to 0.25 percent and gradually increased it by 0.25 percentage points up to 2.25 percent until February 2020, after which it fell to 0.25 percent in May 2020 and subsequently the CNB increased it again up to 5.75 percent (from May 6, 2022).
– In June last year, the Bank Board increased the base rate by 1.25 percentage points to seven percent, last December it reduced it by 0.25 percentage points to 6.75 percent, in February to 6.25 percent, in March to 5.75 percent and will now drop to 5.25 percent.
– From November 2012 to February 2020, the discount rate also rose to 1.25 percent, then fell to 0.05 percent the year before last March, rose to 0.50 percent on October 1 last year, and subsequently the CNB increased it to 4.75 percent (from 6 May 2022). Last year in June, the Bank Board decided to increase the discount rate in the same range as the base rate to six percent, last December it fell to 5.75 percent, in February to 5.25 percent, in March to 4.75 percent and now to 4, 25 percent.
– The third important interest rate, the Lombard rate, at which banks borrow money from the CNB overnight, was 0.25 percent from November 2012, then rose to 3.25 percent by February 2020, and after falling to 1.00 percent the year before in May it rose again to 6.75 percent (from May 6, 2022). It was eight percent from June 2022, 7.75 percent from last December. In February, similar to the other two rates, the bank board decided to reduce it by half a percentage point, i.e. to 7.25 percent. It fell to 6.75 percent in March and now to 6.25 percent.
– Since the creation of the Czech Republic, the amount of the basic interest rate has tended to decline in the long term, but there have also been periods of significant growth. The 2T repo rate was announced for the first time in December 1995 at 11.3 percent (until then, the CNB used a discount rate of 9.5 percent in January 1993). The highest was in June 1997, when it was 39 percent in the short term. In December 1998, it fell below ten percent, in November 2001 below five percent, and in December 2009 it was one percent.
– The fact that the CNB could not use its standard instrument, i.e. interest rates, to achieve the set two percent inflation target due to long-term low interest rates was one of the reasons why the central bank started foreign exchange interventions in November 2013. In an attempt to prevent deflation, it weakened the crown and maintained its exchange rate above 27 crowns per euro for about three and a half years. The CNB ended the foreign exchange intervention regime at the beginning of April 2017, and now the exchange rate is below 24.50 crowns per euro.
– Apart from interest rates of the Czech National Bank, the price of money in the economy is determined by PRIBOR (from the English Prague Inter Bank Offered Rate). It is the interest rate at which banks provide loans to each other on the Czech interbank market. It is often used as a reference rate, from which the amount of interest on mortgages and other loans for citizens and companies is based. The amount of the PRIBOR rate varies depending on how long the money is borrowed. Its amount reacts to the central bank’s rates, so it has also been falling recently.
– Now the PRIBOR is the lowest for annual deals (4.65 percent), the highest is for 14-day deals (5.78 percent).
Development of the two-week repo rate since 2012:
Source: Reuters, ČTK
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Basic information on interest rates announced by the Czech National Bank (the CNB increased the basic interest rate by 0.25 percentage points to 0.5 percent today):
- The price of money depends on the basic interest rates of the CNB
Basic information on interest rates announced by the Czech National Bank (the CNB Banking Council today reduced the basic interest rate by half a percentage point to 6.25 percent):
- The price of money depends on the basic interest rates of the CNB
Basic information on interest rates announced by the Czech National Bank (the CNB increased the basic interest rate by 0.2 percentage points to 0.25 percent today):
- The price of money depends on the basic interest rates of the CNB
Basic information on interest rates announced by the Czech National Bank (the CNB today increased the basic interest rate by 1.25 percentage points to 2.75 percent, the largest increase since 1997):
- The price of money depends on the basic interest rates of the CNB
Basic information on interest rates announced by the Czech National Bank (the banking board of the CNB today reduced the basic interest rate by a quarter of a percentage point to 6.75 percent):
- The price of money depends on the basic interest rates
Basic information on interest rates announced by the Czech National Bank (the Banking Council of the CNB today reduced the basic interest rate by half a percentage point to 5.75 percent):
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