Governor Michl Discusses The Way CNB Analyse Inflation

Czech National Bank Governor Ales Michl delivered an opening speech at a conference in Prague, noting that interest rates will remain "high" for an extended period of time, even as inflation should ease below +10% Y/Y within three months.

• The Governor doubled down on his pushback against the current market pricing of initial rate cuts. He said that "according to FRA rates, the market expects the first rate cut as early as next quarter. We assess market expectations regarding the timing of the first rate cut as premature."
• The Governor shed some light on how the CNB measures inflation, as "measuring inflation through year-on-year changes has the disadvantage that it is a long-backward comparison with prices." The CNB analyses the "moments of inflation," i.e. "three-month moving averages of month-on-month price changes." The CNB then "annualize [the data] so that the numbers are comparable to the target."
• Michl defined the next two phases of the fight against inflation as (1) getting inflation below +10% Y/Y in the second half of the year and (2) getting inflation close to the +2% Y/Y target next year. To that effect, the Bank Board will consider whether to keep interest rates unchanged or raise them in June.
• The full text of Michl's speech can be found here. We await further headlines, as Deputy Governor Eva Zamrazilova speaks at the same event.