Czech Republic's central bank cuts a key interest rate again to help the economy as inflation falls

PRAGUE (AP) — The Czech Republic's central bank on Wednesday cut its key interest rate for a third straight time amid falling inflation and an effort to help the economy.

The cut by a half-percentage point brought the interest rate down to 5.75%. The move was expected by most analysts.

The bank started to trim borrowing costs by a quarter-point on Dec. 21, which marked the first cut since June 22, 2022. It continued with a cut by a half-percentage point on Feb 8.

Inflation declined to 10.7% in 2023 from 15.1% in 2022, according to the Czech Statistics Office, and dropped to 2.0% year-on-year in February, which equals the bank’s target.

The Czech economy contracted by 0.2% in the last three months of 2023 compared with a year earlier.

The Czech bank’s decision comes as major central banks around the world are discussing when to start bringing down borrowing costs.

The Czech bank’s decision comes as central banks around the world, including the U.S. Federal Reserve, are trying to judge whether toxic inflation has been tamed to the point that they can start cutting rates — making it cheaper for consumers and businesses to borrow, spend and invest.

The European Central Bank left its key interest rate at a record high of 4% on March 7, and ECB President Christine Lagarde suggested a much-anticipated cut to borrowing costs would likely wait until June.

In the United States, economists generally envision the first rate cut by the Federal Reserve coming also in June.