Board Member Kubicek Says Rate Cuts May Come Later Than Expected

Bloomberg runs comments from Czech National Bank's newest policymaker Jan Kubicek, who noted that the central bank may start monetary easing later than expected by most investors to prevent lingering risks from upending efforts to bring inflation under control.

• Kubicek said that monetary policy is restrictive enough but a widening budget deficit and rising wages may translate into upward cost pressures. The official noted that August should bring more clarity on whether more tightening is needed or how long rates will stay on hold.
• He said that "if budget consolidation doesn't happen, for me that would be a reason to think about raising rates, or postponing rate cuts." Note that Kubicek told Hospodarske Noviny earlier this month that a widening budget deficit or a significant acceleration in wage growth could justify a resumption of the rate-hike cycle.
• "I don't have reservations about cutting rates this year, but I will first want to see that our policy is working and that the pace of disinflation is in line with our expectations, especially in terms of core inflation."
• Kubicek added that he does not see the Koruna as fundamentally overvalued as its recent gains have been facilitated by an improving trade balance alongside the CNB's intervention regime. The official said that he "can imagine" the FX regime outliving the current interest-rate settings.