The central bank of the Czech Republic cut its benchmark two-week repo rate by 25 basis points to 0.25 percent, a move that had been expected by economists.
The rate cut by the board of the Czech National Bank (CNB) follows a similar 25-basis-point cut in June, bringing this year's rate reduction to 50 basis points.
The CNB also cut its Lombard rate by 75 basis points to 0.75 percent, while the discount rate was cut by 15 points to 0.10 percent. The new rates take effect on October 1.
The Czech economy has been contracting for the last four quarters, leading economists to expect that the CNB would either cut rates further or undertake some form of quantitative easing.
In the second quarter, the Czech Gross Domestic Product fell by 0.20 percent, after a 0.8 percent contraction of the first quarter. The annual shrinkage of the GDP was 1.0 percent in the second quarter.
Inflation in August rose to 3.30 percent, up from 3.10 percent in July. The CNB targets inflation of 2.0 percent.