Czech Monetary Policy Remains on Hold But Official Signal Possible Renewed Cycle of Rate Increases
December 21, 2022
Although policymakers at the Czech National Bank left their two-week repo interest rate unchanged again at 7.0%, which such has been since a hike of 125 basis points last June, two of the seven committee members favored a half-percentage point increase, and the tone of the released statement was hawkish:
The Bank Board states that long-term price stability is also contingent on moderate wage bargaining demands and responsible fiscal policy. The Bank Board will wait for further data and will assess them. It will decide at the next meeting whether rates will remain unchanged or increase. From this point of view, the market’s expectation that we will not increase rates in the first half of next year may not materialise. The Bank Board stands ready to raise rates, especially if the risk of demand-pull inflation increases.
The CNB repo rate had been only 0.25% at the start of 2021, was raised to 3.75% in by the end of last year and to the current 7.0% by mid-2022. That’s still way below recent consumer price inflation, which reached a 29-year peak of 18.0% in September, dipped to 15.1% in October but then rebounded to 16.2% last month.
Copyright 2022, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
Tags: Czech National Bank
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