The Czech central bank again cuts a key interest rate as inflation stays low and economy recovers

PRAGUE (AP) — The Czech Republic’s central bank on Thursday cut its key interest rate for the fifth time in a row as inflation remains low and the economy is showing signs of recovery.

The cut, which had been predicted by analysts, brought the interest rate down by a half-percentage point, to 4.75%.

The bank started to trim borrowing costs by a quarter-point on Dec. 21, the first cut since June 22, 2022. Further cuts of half a percentage point each time followed on Feb. 8, March 20 and May 2.

Inflation declined to 10.7% in 2023 from 15.1% in 2022, according to the Czech Statistics Office, and dropped to the bank's target of 2.0% year-on-year in February, remaining unchanged in March.

It increased to 2.9% in April before dropping to 2.6% in May.

The Czech economy was up by 0.2% year-on-year in the first quarter of 2024, and increased by 0.3% compared with the last three months of the previous year, the figures released by Statistics Office on May 31 said.

That came after the Czech economy contracted by 0.2% in the last three months of 2023 compared with a year earlier.

Central banks around the world are leaning toward lowering borrowing costs as they judge whether toxic inflation has been sufficiently tamed.

The European Central Bank cut its key interest rate on June 6 by a quarter-point to 3.75% from a record high of 4%, moving ahead of the U.S. Federal Reserve in lowering rates.

Federal Reserve officials said they saw some progress on inflation on June 12 but said they expect to cut their benchmark interest rate just once this year.