Czech central bank cuts key interest rate to 3.5% as inflation drops more than expected

PRAGUE (AP) — The Czech Republic’s central bank cut its key interest rate again on Wednesday, with lower-than-expected inflation.

The cut brought the interest rate down by a quarter of a percentage point to 3.50%. The bank had kept the rate unchanged at its previous policy meeting in March.

Analysts predicted the cut was likely, but also said the uncertainty over the tariff policies of U.S. President Donald Trump was an argument in favor of no change.

The bank started to trim borrowing costs by a quarter-point on Dec. 21, 2023, to boost the economy, and further cut rates by half or a quarter of a percentage point several times last year.

Inflation dropped to 1.8% year-on-year in April, the lowest level in seven years, preliminary data by the Czech Statistics Office indicated on Tuesday. It was 2.7% year-on-year in March.

The size of the Czech economy was up 1% in 2024 compared with the previous year.

The European Central Bank, which sets interest rates for the 20 countries that use the euro currency, lowered its benchmark rate by a quarter percentage point to 2.25% on April 17 for the seventh time.

The U.S. Federal Reserve was expected to keep its key short-term interest rate unchanged at about 4.3% later on Wednesday, despite weeks of harsh criticism and demands from Trump that the Fed reduce borrowing costs.