Central European Central Banks Hold Rates Amid Wage Pressures and Fiscal Risks

Central banks in Central Europe are keeping interest rates steady this autumn, with policymakers emphasising caution as inflationary pressures persist alongside signs of weaker economic momentum.

In the Czech Republic, the National Bank has held its main policy rate at 3.5 percent since May. Minutes from the most recent board meeting indicate that members believe the current level, together with a strong koruna, is restrictive enough to contain price growth. The currency has been trading around 24.3 CZK/EUR, firmer than the central bank’s forecast. Board members pointed out that a stronger koruna itself dampens inflation, reducing the urgency to act. Still, wage growth running above 7 percent in the first half of the year and a widening fiscal deficit were identified as potential risks to the outlook.

Poland’s central bank has also kept rates unchanged, with its benchmark at 4.75 percent. After cutting aggressively in late 2023, the Monetary Policy Council shifted to a holding pattern in 2024 as inflation slowed but remained above target. Policymakers are weighing the effects of resilient consumer demand and government spending against a slowdown in exports. Analysts note that the zloty’s relative stability has allowed the bank to avoid further adjustments this year.

Hungary continues to operate with the highest policy rate in the region at 6.5 percent. The central bank paused its cycle of cuts in September, signalling that it wanted to consolidate stability after years of double-digit inflation and volatile market conditions. The forint has been steadier in recent months, but officials remain cautious about further moves until they see more durable disinflation.

For Slovakia, decisions are set in Frankfurt. The European Central Bank’s deposit rate remains at 2 percent after being lowered in June. Policymakers there have paused since, watching whether euro area inflation continues to converge toward the 2 percent medium-term target. Energy prices, wage settlements and geopolitical tensions are seen as key factors that could sway the outlook.

Across the region, central banks are treading carefully. Inflation has retreated from the peaks of 2022–2023, but pressures from wages, fiscal deficits and energy policy changes remain. In the Czech Republic, concerns have also been raised about the costs of new European climate rules, while in Poland and Hungary the balance between domestic spending and external demand is under close scrutiny.

Analysts expect that most of the region’s central banks will maintain their current settings at least into the end of the year, with the possibility of gradual easing only if economic growth slows more sharply and inflation continues to decline.