The Czech National Bank’s autumn 2026 Monetary Policy Report assesses how higher market interest rates are tightening financing conditions beyond central banks’ policy measures. Domestic interest rate swap rates have risen by as much as 1.2 percentage points since the start of 2026, broadly tracking foreign rates. Higher borrowing costs are dampening investment and housing loan demand, helping to restrain inflation.
The increase reflects a reversal in market expectations following the conflict in the Middle East. Higher oil prices and renewed inflation concerns shifted expectations away from monetary easing toward a prolonged period of restrictive policy. Domestic and foreign rates for maturities above one year rose by as much as 1 percentage point within days in early March and did not return to their levels at the end of February after markets stabilized. Global indebtedness and rising debt servicing costs have added pressure on longer maturity rates, while Czech rates remain closely linked to foreign markets.
The average corporate lending rate rose by 0.7 percentage points from the start of the year to 5.6% in September, adding a drag on investment. Mortgage rates, which respond more gradually to market movements, increased by 0.6 percentage points to 5.2%. Higher mortgage costs are reducing housing loan demand, and a large proportion of banks expect demand to fall further in the fourth quarter, slowing property price growth. Because the core forecasting model captures this additional tightening only partially, the forecast includes an expert adjustment for a stronger dampening effect on investment, while assuming only a modest impact on consumption.