Czech rates to rise at 3rd consecutive central bank meeting

The Czech National Bank is expected to raise the country's basic interest rate for the third straight time on Wednesday. The move is being justified by an attempt to cool off the overheating labor market and to put a lid on the residential market. But the bank is also concerned that the Czech koruna continues to be weaker than it likes, raising the risk of inflation. "Another rate increase before the end of the year cannot be ruled out," writes Lukáš Kovanda, chief economist at Czech Fund in kurzy.cz. "There's a certain risk in this rapid approach to tightening the exchange screws in the form of a growing gap between interest rates in the Czech Republic and in the eurozone. After raising the rates this week, the gap between the basic rates of the CNB and the basic rate of the European Central Bank will rise to 1.5 percent. The last time the gap was this big was in November 2001."