PRAGUE - The Czech central bank raised its main interest rate by 75 basis points on Thursday to 5.75%, the highest point since 1999, as inflation soared on global price shocks that combined tight domestic labour market.
The hike was bigger than market expectation of 50 basis-point increase. The bank has been tightening policy since last June, raising borrowing costs by 550 basis points.
Policymakers believe that the main repo rate may be near or at peak as inflation is expected to fall significantly next year, the horizon where the bank sees its current rate decisions will having full effect.
Shocks from the war in Ukraine and the soaring inflation, at 12.7% year-on-year in March, have also dented confidence and made analysts predict an economic slowdown.
The bank's board based its decision on a new quarterly economic forecast, due to be released at 3.45 p.m. (1345 GMT) on Thursday, when Governor Jiri Rusnok will also hold a news conference.
The forecast is expected to sharply cut the growth outlook for this year from the current 3%, and raise this year's inflation outlook from 8.5%.
(Reporting by Jan Lopatka and Robert Muller)