If the exchange rate of the crown is in 2019 weaker than the current forecast, this will create room for a faster increase in interest rates. This is based on the minutes of the December session of the Czech National Bank (ČNB) Board published on January 4, 2019. Central bankers agreed that decision-making about monetary policy will be more complicated than in 2018.
The pro-inflationary effect of the exchange rate is balanced by lower observed inflation and a drop in oil prices. It was also stated that macroprudential instruments, such as limits for housing loans and capital reserves, are currently sufficient.
Written by the team of CzechTrade office in Calgary, Canada