PRAGUE, Reuters – On March 31, the Czech National Bank will raise its main interest rate 50 basis points to 5.00%. This would mark a significant increase in the central bank’s rates since 2001. It is doing so to combat an inflation spike that has been exacerbated by war in Ukraine.

In June, the central banks raised their two-week repo rates by 425 base points. They are tightening aggressively in an effort to combat inflation. The rate reached 11.1% in February which was a record high for February (24 years). The rising cost of energy after the Ukraine conflict is causing price pressures to continue building.

A Reuters survey showed that most economists expected the central banks to increase their interest rates on Thursday. However, only a small number of them predicted higher borrowing costs later in this year.

Nine of the twelve analysts polled expected an increase of 50 basis point this week. Two others predicted a rise by 25 basis points. One expected no change.

Six of six respondents gave an outlook beyond March. Three forecasted that the main rate will peak at 5.5% this year. Only one polled predicted rates that would increase above 5% in January.

On Thursday, the central bank will declare its decision at 2:30 p.m. (1330 GMT). There will be a press conference at 3 :45 p.m. in which Governor JiriRusnok and other participants will speak about their vote.

Before Russia invaded Ukraine on February 24, Moscow called it a “specially military operation”. Central bankers believed that rates could not rise above 5%. However, opinions are changing.

Tomas Holub, a Board member, stated to Reuters last week that he anticipated being in camp for a larger than expected move at Thursday’s gathering. But he said he would be open to discussion about increasing the rate to 5.00% in May and now.

Marek Mora, vice-Governor, said that he sees rates rising “well above” 5 percent.

It is possible that the central bank will also consider using large amounts of international reserve, estimated at 64% gross domestic product, in order to combat inflation, and not as a way to stabilize exchange rate fluctuations.

On March 4, the bank declared that it intervened in the markets following the sharp decline in the crown’s value relative to other central European currencies due to the Ukraine conflict.

Holub indicated this month that he preferred to tighten the monetary policy via rates, rather than through currency interventions.