The bank council of the Czech National Bank cut its base rate by 0.75 percent to just 0.25 percent on Thursday in a move that had been widely anticipated. Following two rate cuts in March at the outset of the coronavirus outbreak, it means that interest rates have fallen by a total of 2 percent in an attempt to save the economy. But it’s unclear if this will have any substantial effect, as economists are currently predicting a drop in GDP of around 8 percent for 2020. The CNB also reduced the rate at which banks can borrow from the central bank (the Lombard rate) to 1 percent but it left the discount rate at 0.05 percent. CNB’s governor justified the rate cut by saying the bank believed the current risks to the economy to be unprecedentedly high and that they required a more radical response through the loosening of credit restrictions. “There’s a high possibility that these low rates will be with us for some time until the economy recovers from this situation,” he said.
