© Reuters. FILE PHOTO: The Czech National Bank is seen in Prague, Czech Republic, April 26, 2023. REUTERS/David W Cerny
PRAGUE (Reuters) – Raising the Czech National Bank’s interest rates further would still make sense as it could serve as a signal that the central bank has not given up on its efforts to tame inflation, board member Tomas Holub said on Sunday.
The central bank has kept its main interest rate at 7.00% since last June when it delivered the last hike in a year-long tightening cycle.
“The situation that rates have been unchanged for a long time makes people think that the central bank is not doing enough, and from my point of view even the signal effect of a further increase in interest rates would be significant,” Holub said in a televised debate.
When asked if a hike would make sense at the next monetary policy meeting on June 21, Holub, who has consistently backed rate hikes, said yes.
“If we have the risk of a wage-inflation spiral here, then sending the signal is still meaningful to me,” Holub said.
The central bank expects inflation, which eased to 12.7% year-on-year in April, to come down nearer its target early in 2024.
The Czech Republic’s central bank governor, Jiri Holub, has expressed his opinion that raising interest rates further would still make sense.
Speaking at a press conference arranged by the central bank this week, Holub said the main reason for keeping interest rates in the country to their current 1% level is to generate inflation, a situation he believes to be under control.
The governor also stated that in his opinion it would make sense to raise interest rates further in order to provide some further protection against a potential downturn in the Czech Republic’s economy.
By raising interest rates, it is hoped that it will help to create more capacity in the labor market and prevent the Czech economy from overheating with prices climbing too quickly.
The governor referred to some of the problems that have affected the Czech economy in the past, noting that while a number of them have been resolved, some remain, such as the low productivity of Czech companies.
Holub also said that while other central banks such as the European Central Bank are easing monetary policy in light of the economic slowdown, he doesn’t believe the Czech Republic should be following suit.
In conclusion, it appears that the Czech Republic’s central bank governor, Jiri Holub, believes that raising interest rates further still makes sense and that this would help to protect the country’s economy from an undesirable slowdown.