Czech central bank cuts key interest rate to 3.75% as inflation stays higher than expected

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PRAGUE (AP) — The Czech Republic’s central bank cut its key interest rate again Thursday with inflation higher than expected after keeping the rate unchanged at its previous policy meeting in December.

The cut, which had been predicted by analysts, brought the interest rate down by a quarter of a percentage point to 3.75%.

The bank started to trim borrowing costs by a quarter-point on Dec. 21, 2023 to boost the economy. Further cuts of half a percentage point followed last year on Feb. 8, March 20, May 2, and June 27. Cuts of a quarter of a percentage point came on Aug. 1, Sept. 25 and Nov 7.

Inflation was at 2.8% year-on-year in January, the preliminary data by the Czech Statistics Office indicated on Thursday. It was down by 0.2%, compared with December but still higher than the rate of 2.6% predicted by analysts.

The bank’s target is 2%.

The size of the Czech economy was 1.0% up in 2024 compared with the previous year, according to the Statistics Office.

The European Central Bank, which sets interest rates for the 20 countries that use the euro currency, lowered its benchmark rate by a quarter percentage point to 2.75% on Jan. 30. Eurozone countries are struggling to grow as consumers burned by inflation warily eye price tags and businesses try to navigate political turmoil in the zone's leading economies, France and Germany.

The ECB cut came a day after the U.S. Federal Reserve held off on reducing rates, underlining the contrast between more robust growth in the U.S. economy and stagnation in Europe, which recorded zero growth at the end of last year.