Czech central bank raises policy rate again

PRAGUE (AP) – The central bank of the Czech Republic has again taken aggressive steps to raise its key interest rate in a continued effort to bring soaring inflation under control.

Wednesday’s 1 percentage point rise to 3.75% was the fifth consecutive increase since June and was higher than analysts expected. The bank, which sees high consumer prices as a major threat, also said it would raise the rate.

Inflation jumped to 6% in November, the highest level in 13 years and well above the bank’s target of 2%.

Banks controlling monetary policy around the world have started to focus on stimulating the coronavirus-hit economy to tackle the surge in consumer prices that happened during the recovery. Last week, the Bank of England became the first in a large advanced economy to raise interest rates since the start of the pandemic. Others, including the European Central Bank and the US Federal Reserve, are preparing to exit economic stimulus measures linked to the pandemic.

In the Czech Republic, the last time the central bank changed rates was on November 4, when it raised the key rate by a point and a quarter to 2.75%.

It was the first such measure under the new government led by Conservative Prime Minister Petr Fiala, who was sworn in last week. The former cabinet of populist Prime Minister Andrej Babis has protested the increases, saying they are hurting an economy recovering from the coronavirus pandemic.

The Czech economy grew 2.8% in the third quarter, compared to the same period a year ago.

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Stephen V. Lee