Czech Republic Property Investment News

Cost of borrowing increases in Czech Republic

The central bank of the Czech Republic raised interest rates by a quarter-point on 30th August, the second interest rate increase in the past two months and the third such rise this year. Even given this rise to 3.25%, the Czech Republic still has the lowest interest rates in the European Union.

The Czech central bank stated the reasons behind the rise to 3.25% were concerns about growing inflation and “economic developments”, given the continuing strong consumer demand across Central and Eastern Europe. The rise came as a surprise to most analysts; indications were that the bank would put off any increases given turbulence in the world market. Although the decision was unexpected, some experts felt it was obvious that the Czech Republic would continue to tighten monetary conditions, and some even believe that there may be yet another rate hike this year.

This news comes after the Polish monetary authorities also raised their borrowing costs by 25 basis points. It was, as in the case of the Czech Republic, the Warsaw-based central bank’s third increase for the year and followed signs of continuing solid growth and robust demand from consumers in Central Europe’s largest economy.

The other two leading new EU member states, Slovakia and Hungary, chose to delay any interest rate rises in their countries, however, due to the uncertainty regarding the global interest rate outlook.