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Czech National Bank Considers Further Interest Rate Hikes to Curb Inflation

Central Bank board member Tomas Holub signals the potential for future interest rate increases to manage inflation.

Czech National Bank
Czech National Bank

Holub Advocates for Stronger Inflation Control Measures

Tomas Holub, a board member of the Czech National Bank, suggested on Sunday that further elevation of the bank's interest rates could effectively signal the institution's dedication towards curbing inflation. This move could continue the Czech National Bank's strategy for managing inflation, which it has implemented over the past year.

Current Status and Potential Impact of Interest Rates

Since June of the previous year, the central bank has maintained its principal interest rate at 7.00%. This followed the final hike in a year-long tightening cycle. In a televised debate, Holub expressed that the long-standing unchanged rates may convey a false impression that the central bank needs to be more proactive. According to him, "even the signal effect of a further increase in interest rates would be significant."

Prospects for Future Rate Hikes

When questioned if a rate hike would be logical in the upcoming monetary policy meeting on June 21, Holub, a consistent supporter of rate hikes, responded affirmatively. "If we have the risk of a wage-inflation spiral here, then sending the signal is still meaningful to me," stated Holub. This suggests the potential for increased interest rates shortly.

Predictions on the Inflation Trend

Inflation in the Czech Republic was reported at 12.7% year-on-year in April. The central bank forecasts that it will approach its target early in 2024. This prediction outlines the ongoing attempts to manage inflation and bring it closer to the intended objective.