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Czech central bank raises interest rates after 9 years

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Czech central bank raises interest rates after 9 years

The Czech National Bank on Aug. 3 raised its two-week repo rate by 20 basis points to 0.25% and lifted its Lombard rate by 25 basis points to 0.50%, while keeping the discount rate unchanged at 0.05%.

The Czech koruna gained up to 0.8% to trade at 25.90 Czech koruny to the euro after the decision, the highest level since the central bank ended its currency cap at around 27 koruny in April, Reuters reported. It later traded just above 26 koruny.

The central bank said the increase in domestic interest rates were the first since February 2008. They also marked the first change in interest rates since November 2012, when the repo rate was cut to "technical zero."

Governor Jiri Rusnok said domestic factors led to the rate hike, while cautioning that the European Central Bank's relaxed monetary policy would contribute to a delay in the country's planned return to normal rate levels, Reuters reported.

The CNB has not decided about the timing of future rate hikes, Rusnok said.

The CNB raised its growth forecast to 3.6% for 2017 and projected economic expansion above 3% in 2018 and 2019.