Czech Central Bank Raises Key Rate to 5% to Tame Inflation

The Czech Republic’s central bank has again raised its key interest rate in an effort to tackle soaring inflation.

Thursday’s hike of half a point to 5% was the seventh straight increase since June, and had been expected by analysts

The bank, which considers high consumer prices a major threat, also had indicated it would raise the rate. It is now at its highest level since 2001.

The bank expects inflation might increase further in the course of 2022 due to Russia’s invasion of Ukraine.

Fed by high energy prices, inflation jumped to 11.1% in February. That’s well above the bank’s 2% target.

The bank’s decision comes after the Statistics Office announced that the country´s economy grew by 3.3% last year – more than expected – after contracting by 5.8% the previous year due to the coronavirus pandemic.

2021 economic growth at 3.3 percent

The Czech economy grew by 3.3 percent year-on-year in 2021 and by 3.6 percent in the fourth quarter, according to the refined estimate by the Czech Statistics Office published on Thursday.

It represents the best result since 2017, when GDP grew by 5.4 per cent year-on-year.

However, the growth was not sufficient to counter the extent of the recession of 2020, which saw the country’s gross domestic product fall by 5.8 percent. That figure represented the biggest drop in the recent history of the Czech Republic.


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