Interview of Eva Zamrazilová, CNB Deputy Governor
By Peter Laca and Krystof Chamonikolas (Bloomberg 29. 4. 2025)
A Czech central bank deputy chief signaled the nation’s monetary easing cycle may be coming to an end as a rebounding housing market adds to inflation risks.
Eva Zamrazilová said she will decide between cutting the key interest rate by another quarter of a percentage point on May 7 or holding it at 3.75%. The deputy governor also questioned market bets on the scope of further easing over the next year.
“I’m leaving the decision open for the next meeting,” Eva Zamrazilová said in a Prague interview on Monday. “But even if I decide on a cut, it can’t be ruled out that it will be the last one in this cycle.”
Following a rapid decline in borrowing costs last year, the Czech National Bank switched to a more cautious approach by pausing in December, then lowering interest rates again in February and holding them last month. Policymakers are focusing on persistent growth in the cost of services, wages, homes and the budget deficit as key domestic price risks.
The Czech Republic has seen mixed inflation signals since the last policy meeting in March, with the headline rate stable at 2.7% and cheaper fuels offsetting costlier food items. Household consumption is recovering after the worse cost-of-living crisis in three decades but investments are lagging.
While services prices have indicated a slight moderation in growth, there is a clear trend that both headline and core inflation will continue to be pushed upward by rising property prices via so-called imputed rent, according to Eva Zamrazilová.
The housing market will be a persistent inflationary factor this year and next and a reason why interest rates will have to be higher – by about 25 basis points – than what they would be if imputed rent were growing at a normal pace of around 2% a year, she said.
“Growth in property prices currently is and will probably remain faster than previously expected,” Eva Zamrazilová said. “We’re seeing that the mass of money, accumulated through higher savings in the past few years, is beginning to move.”
Risks of higher tariffs are clouding the longer-term outlook, with trade wars likely to curb global growth and damping demand, while potential supply-chain disruptions and other aspects of “deglobalization” creating inflationary pressures, according to the deputy governor.
Investors have boosted bets on the scope of Czech rate cuts since the announcement of new US import levies in early April, with money market prices indicating expectations of a terminal rate at around 3% within the next 12 months.
“It can’t be completely ruled out, but I’m wondering whether that’s perhaps an overly optimistic expectation, given the current high degree of uncertainty,” Eva Zamrazilová said. For her, the combination of still strong growth in cost of services, rising home prices and real wage growth means that the process of disinflation isn’t finished yet and requires cautious
monetary approach.
“I would like to help the economy breathe a little easier, and the preferred option is not to keep monetary policy overly restrictive,” she said.“ But it needs to be sufficiently tight to make sure that inflation doesn’t quicken again.”