The Czech National Bank (CNB) has lowered its main interest rate by 0.25 percentage points to 3.5%, citing an improved external price environment alongside concerns over global economic prospects. The Bank Board’s decision reflects a cautious approach to monetary easing, balancing inflation risks with signs of weaker global growth.

According to Jaromír Šindel, Chief Economist at the Czech Banking Association, the decision aligns with market expectations, with forecasts pointing towards a 3% rate by mid-2026. Of 15 analysts surveyed by Reuters, most anticipated the reduction. However, Šindel noted he personally saw stronger grounds for maintaining the rate at 3.75%, given ongoing inflationary pressures.

The central bank’s outlook incorporated only minor adjustments to its previous forecasts, likely reflecting uncertainty surrounding global trade tensions. Šindel highlighted that the CNB may present alternative economic scenarios at its upcoming meeting on 12 May, as hinted by Governor Michl.

The decision was influenced by two key factors: the perception that the current rate level remains restrictive in real terms, especially in the context of recent and expected inflation trends; and a reduction in the risk of imported inflation, though it remains unclear whether this reflects lower commodity prices or the potential impacts of a US–China trade dispute.

The CNB’s latest forecast suggests a faster decline in interest rates compared to its February projection, aiming for a rate of 3.25% by the end of 2025 and 3% in 2026. This trajectory accounts for the negative impact of trade conflicts on the Czech economy. However, Šindel noted that the CNB’s GDP growth outlook may be overly optimistic if trade tensions escalate further, though current economic data remain solid.

The central bank revised its 2026 GDP growth projection down by 0.3 percentage points to 2.1%, while leaving this year’s growth estimate unchanged. The adjustment follows a similar downward revision in the eurozone’s growth outlook. The CNB anticipates a temporary economic slowdown in the second half of 2025, with a quarterly contraction of 0.3%, followed by stronger average growth of 0.75% per quarter in 2026.

Interest rate forecasts reflect this outlook, with the 3M PRIBOR rate now expected to fall to 2.85% by the fourth quarter of 2025 and to 2.75% by mid-2026, before stabilising slightly below 3% by the end of 2026. The lowered rate trajectory mirrors weaker growth expectations, though April’s lower-than-expected inflation may have also played a role.

Šindel cautioned that a stronger economic rebound could tighten the labour market and necessitate keeping interest rates closer to 3%, even as European Central Bank rates remain lower. The CNB projects a koruna exchange rate of 25.3 CZK/EUR in 2026, despite potential upward pressure from a rate differential.

The CNB’s measured rate cut reflects its balancing act between supporting growth and controlling inflation, as economic uncertainty continues to shape policy decisions.

Source: CNA

Miloslav Ludvík, the former director of Motol University Hospital, has filed a constitutional complaint challenging the court’s decision to keep him in custody. His lawyer, Simona Kadlecová, told the Czech News Agency that the courts violated his right to a fair trial, arguing that the rulings lacked clear justification and failed to meet legal standards.

Ludvík has been in pre-trial detention since late February, facing charges of subsidy fraud, harming EU financial interests, accepting bribes, and attempted money laundering. If convicted, he could face up to 12 years in prison. The District Court for Prague 5 ordered his detention citing concerns he might flee, continue criminal activity, or influence witnesses. An appeal was later dismissed by the Prague City Court.

Kadlecová criticized the courts for failing to provide concrete evidence supporting these concerns. “The Municipal Court ignored all objections raised in our appeal,” she said. “Neither court provided adequate reasoning, violating my client’s right to a fair trial and unlawfully restricting his personal freedom.”

Court documents reviewed by the Czech News Agency show the district court mistakenly conflated decisions about Ludvík with those of his co-defendant, former deputy director Pavel Budinský. For example, the court referenced bail guarantees offered by Budinský, though Ludvík had instead proposed alternatives such as a travel ban and electronic monitoring.

Kadlecová also accused the court of relying heavily on police reports without thoroughly reviewing surveillance evidence that underpins the case. She rejected claims that Ludvík had foreign ties, stating he neither owns property nor has ever lived abroad.

Ludvík has also filed a complaint challenging the initiation of his prosecution, which remains undecided by the public prosecutor. Similar complaints have been filed by other defendants in the case. Kadlecová noted that defense teams only recently received transcripts of surveillance recordings, despite media leaks suggesting otherwise. “We’re still waiting for access to the original recordings, which are crucial for our defense,” she said, adding that witness interviews are ongoing.

Police allege that Ludvík and Budinský accepted bribes from contractors providing services to the hospital, including construction, cleaning, and maintenance. Prosecutors claim that kickbacks were a precondition for awarding contracts. Co-defendant and lawyer Miroslav Jansta is accused of helping to launder the illicit funds.

Following police raids in February, the Minister of Health removed Ludvík from his post. Authorities have so far seized assets exceeding CZK 100 million from the accused. Ludvík’s appeal against the asset seizure was rejected by the České Budějovice Regional Court.

Source: CTK