27 June 2024 , 14:33
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The Czech Republic's central bank has slashed its key interest rate for the fifth consecutive time, as inflation remains low and signs of economic recovery emerge.
Analysts had predicted the cut, which saw the interest rate drop by half a percentage point to 4.75%. The bank began reducing borrowing costs by a quarter-point on 21st December, marking the first cut since 22nd June 2022. Subsequent cuts of half a percentage point each followed on 8th February, 20th March, and 2nd May.
Inflation fell from 15.1% in 2022 to 10.7% in 2023, according to the Czech Statistics Office, hitting the bank's target of 2% year-on-year in February and remaining steady in March. It rose to 2.9% in April before falling to 2.6% in May.
The Czech economy grew 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, according to figures released by the Statistics Office on 31st May. This follows a contraction of 0.2% in the last three months of 2023 compared with a year earlier.
Central banks worldwide are leaning towards lowering borrowing costs as they assess whether inflation has been sufficiently controlled. The European Central Bank reduced its key interest rate on 6th June by a quarter-point to 3.75% from a record high of 4%, moving ahead of the US Federal Reserve in lowering rates.
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Federal Reserve officials have stated that they have seen some progress on inflation as of June 12. However, they anticipate only one cut to their benchmark interest rate this year.