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Bank Board Sees Rapid Disinflation From Spring Onwards, Signals No Rate Cuts At Least Until Q3


The Czech National Bank released minutes of its most recent monetary policy meeting, where the Bank Board voted 5-2 to keep interest rates unchanged. Part of the meeting was attended by Finance Minister Zbynek Stanjura.

  • The meeting started with the presentation of the new economic forecast, which suggested that "from spring onwards," inflation "would decline quite quickly due to tight monetary conditions and easing cost pressures, falling below 10% in the second half of the year."
  • "The Bank Board assessed the risks and uncertainties of the baseline scenario of the forecast as being significant and going in both directions."
    • Upside risks: more expansionary fiscal policy, the threat of inflation expectations becoming unanchored, the risk of a wage-price spiral
    • Downside risks: the stronger than expected downturn in investment and consumer demand, faster than expected decline in core inflation
  • Governor Ales Michl "opened the meeting by saying that the strong koruna was significantly helping in the fight against inflation" and noted that "interest rates would remain higher for some time than they had normally been in the past ten years."
  • "A significant part of the debate was devoted to inflation expectations and the risk of a wage-price spiral (...) Another topic of discussion was the effect of fiscal policy. (...) The exchange rate was also discussed in detail."
  • "A majority of the Bank Board agreed that any future decline in interest rates should occur later than indicated by the baseline scenario of the forecast. In this respect, the scenario of keeping interest rates unchanged in 2023 Q1–Q3 was considered useful."
  • Click here to see the full document.

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