PRAGUE (Reuters – Czech National Bank may raise its main rate by 50basis points to 5.50% May 5, according to Reuters Poll. The move will push borrowing costs to the highest point since 1999, despite rising inflation.

Since June, the central bank raised its two-week repo rates by 425 basis point. This is in response to rising inflation to 12.7% in March.

Rising energy prices have contributed to inflation. This was made worse by Russia’s invasion of Ukraine. In addition, the bank has witnessed strong domestic demand which is adding to home pressure.

According to Reuters, 11 of the eleven analysts polled expected that the central bank would increase its interest rate by 50 basis points on Thursday. This is similar to the March rise.

Although some analysts raised earlier the possibility for a 75 basis-point increase, they are now cautiously waiting to hear from central banks.

Marek Mora, Vice-Governor of the Central Bank, stated in an interview on April 26, with Reuters, that while inflation is at its highest point and demand continues to fall due to falling real incomes it was facing a dilemma about whether or not to increase interest rates.

Tomas Nidetzky was the Vice-Governor and stated last week that there will be an argument at Thursday’s meeting about whether to raise the standard 25-basis points or make a more substantial 50-basis move.

In an interview with Bloomberg News Agency last week, Tomas Holub stated that the Board should consider a minimum of 50 basis points.

At 2:30 PM (1230 GMT), the central bank will make its announcement. A news conference will follow at 3:45 pm, where Governor JiriRusnok will give a quarterly update on a macroeconomic outlook.

There were eight rates analysts offering an outlook after May. Four expected rates to peak at 5.5%, and the remaining four split on whether a 25- or 50 basis point increase would be possible.

The bank will continue to debate whether or not it can use some of its vast foreign currency reserves in order to increase the crown and lower import prices. Some central bankers expressed reservations over such an action.