Czech and Polish central banks cut target rate

Yesterday, two central banks in the region announced reductions in their key interest rates. The Czech National Bank lowered its interest rates by 25 basis points, from 3.75% to 3.25%, with a voting outcome of 6:1, as one board member voted for maintaining the current rate. The expectations for a rate cut in May were divided, but the April inflation figure, which significantly undershot expectations at 1.8%, likely influenced the decision. Looking ahead, we anticipate the next CNB rate cut in November, with a final reduction projected for May 2026, bringing the key rate down to 3%. Similarly, the Polish central bank reduced its target rate by 50 basis points, from 5.75% to 5.25%. This move was widely anticipated by the market, although the future actions of the Monetary Policy Council remain a topic of discussion. The press release accompanying the decision was concise, citing primary reasons such as lower-than-expected inflation, decreasing wage growth pressures, and a sluggish economy. In our baseline, we will see additional 50-75bps worth of cuts until the end of the year.