The Czech Central Bank has decided not to raise interest rates again
Despite high inflation in recent months, the Czech Central Bank has decided not to change interest rates, this is because the ČNB board decided to send a signal of stability. Governor Aleš Michl said that “the Czech Central Bank will continue to defend the exchange rate of the koruna from abnormal fluctuations”, that’s why the past few months the institution has been implementing interventions to prevent excessive weakening of the koruna.
Last Thursday, November 3rd, the Bank Board met and voted to leave interest rates as they are, with only two votes wanting to raise it by 0.75 percent. It also confirmed its determination to restore inflation to the 2 percent target within a year and a half, meaning that rates will remain high for some time.
The Czech economy faces strong inflationary pressures on costs from the external environment and pressures from domestic demand. Household consumption, which is key to the development of demand-side inflation, is already dampened by high energy and food prices, negative sentiment and rising interest rates.
On the other hand, unemployment remains low: industrial production is resisting rising costs and problems in supply chains. However, leading indicators point to a slowdown in foreign demand. On the international front, new forecasts predict that external cost inflationary pressures will remain strong this year and in the first half of next year. Deteriorating economic sentiment, rising living costs for households and businesses, together with the tightening of monetary policy by major central banks, will lead to a slowdown in global economic activity next year and a gradual reduction in global inflationary pressures.
Sources: https://www.camic.cz/ ; https://www.cnb.cz/
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