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Czech Central Bank Hikes Key Interest Rate Unexpectedly

The Czech National Bank raised its key interest rate unexpectedly on Thursday, after holding it unchanged for five policy sessions in a row.

The Bank Board, led by CNB Governor Jiri Rusnok, decided to raise the two-week repo rate by 25 basis points to 2.25 percent, the central bank said in a statement on Wednesday.

Economists had widely expected the rate to be left unchanged.

The previous change in the key rate was a quarter-point hike in May last year.
The discount rate was raised to 1.25 percent and the lombard rate to 3.25 percent.

Capital Economics economist Liam Peach said the latest rate hike is likely to a one-off.

"With inflation likely to ease and growth to slow, we think the policy rate will be lowered by next year," the economist said.

Rusnok is set to hold a press conference to explain the rationale behind the latest rate decision at 9.15 am ET.

"The central bank will probably maintain its hawkish bias, although we suspect it won't flag another hike," Peach said.

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