Czech Central Bank: Rates likely to Rise if Forecast Confirmed

Published: 20.06.2022 Related countries:  Czech Republic Czech Republic

The Czech economy is struggling with high inflation.

The Czech central bank will likely raise interest rate further in June if data from the economy are in line with the bank's latest macroeconomic forecast, Governor Jiri Rusnok said on the 22nd of May 2022.

"If the current forecast is being confirmed, the probability is high," he said in a Czech Television debate.

Rusnok, who will leave his post a week after the June 22 policy meeting, said it was possible the main rate, now at 5.75%, would go over the 6% mark in June but did not say how likely that was.

Rusnok will be succeeded in July by board member Ales Michl, who has opposed all 550 basis points worth of rate hikes the bank has delivered over the past year, and has said he expected to propose rate stability for some time after he takes over.

His selection prompted a selloff of the crown currency, leading the central bank to intervene in the foreign exchange market earlier this month to avoid currency weakness from raising inflation further through import prices.

The bank's latest quarterly forecast issued in May saw official interest rates peaking around 8% this quarter, but the policymaking board took a path somewhat closer to an alternative scenario modelling a slower inflation drop amid a lower rate path.

The bank expects inflation to peak at 15% in June, far from its 2% target. The majority of the bank's board has seen a demand component of inflation, largely from tight domestic labour market, which required response from monetary policy.

Delivered by CzechTrade office Canada.
Source: Reuters