Dep Gov Frait Says It's Possible Or Even Desirable To Start Easing Policy Cautiously

Ekonom weekly ran an interview with CNB Deputy Governor Jan Frait, who said that it is "possible, or even desirable, to approach the easing of monetary policy very cautiously" because "inflationary pressures are evidently falling" and headline price grwoth may fall to "relatively low levels below +3% Y/Y next year".

• The official's suggestion that lower interest rates could be appropriate comes as no surprise, given that Frait voted to cut the two-week repo rate by 25bp already in November. In his interview with Ekonom, he reaffirmed his support for moving in gradual steps of 25bp.
• Frait also said that "the last mile to the +2% Y/Y inflation target will be very difficult. It will require effort, tighter monetary conditions over a longer period of time, and may not be easy at all," which is why central banks are saying "we're likely to keep interest rates at a relatively higher level for a longer period of time".
• According to Frait, the current levels of the exchange rate mean that the koruna is "still relatively strong". He also praised the CNB for managing to convince the market that its current leadership will not "keep interest rates very low to support temporary pseudo-economic growth, or prefer a weak koruna to help businesses export".
• Earlier this week, Deputy Governor Eva Zamrazilova said that the December rate decision is "50-50" for her. Jan Prochazka said that delaying the cut until February could give a false impression that the CNB doubts its optimistic inflation forecast. These comments came out ahead of the CNB's media blackout starting today.