The Czech central bank cuts its key interest rate as inflation falls and the economy slowly recovers

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PRAGUE (AP) — The Czech Republic’s central bank on Thursday cut its key interest rate for the sixth time in a row as inflation falls and the economy recovers more slowly than expected.

The cut, which had been predicted by analysts, brought the interest rate down by a quarter of a percentage point, to 4.50%.

The bank started to trim borrowing costs by a quarter-point on Dec. 21, the first cut since June 22, 2022. Further cuts of half a percentage point each time followed on Feb. 8, March 20, May 2 and June 27.

The size of the Czech economy was up by 0.4% up year-on-year in the second quarter of 2024, and increased by 0.3% compared with the previous three months, the preliminary figures released by Statistics Office on Tuesday said.

Inflation dropped to the bank’s target of 2.0% year-on-year in June from 2.6% in May.

Central banks around the world are leaning toward lowering borrowing costs as they judge whether toxic inflation has been sufficiently tamed.

The European Central Bank left its key interest rate benchmark unchanged on July 18 at 3.75%, where it has stood after a single quarter-point cut rate at the previous meeting on June 6.

Federal Reserve Chair Jerome Powell on Wednesday set the stage for the central bank’s first rate cut in four years, citing greater progress toward lower inflation as well as a cooler job market that no longer threatens to overheat the economy.

Still, the Fed kept its key interest rate unchanged at a 23-year high of 5.3% with September's interest rate cut “could be on the table.”