Jan Frait Sees Moderate Recession This Year, Won't Speculate About Rate Cuts

Czechia may experience a moderate recession this year, but will likely avert catastrophic scenarios, such as a sharp decline in production or a surge in unemployment, CNB's Jan Frait told Newstream.cz in an interview.

• On the inflation outlook: "We are in the middle of creating a new forecast. But it's probably no secret that we expect a month-to-month shock in January. Year-on-year inflation will rise from less than sixteen percent to somewhere above 18 percent. But we assume this will indeed be the last such increase. After that, inflationary pressures will weaken month after month."
• On the growth outlook: "Our current forecast is for a slight decline. Around one percent. This is the forecast from November and we don't think there is any need to change it yet. In my opinion, this mild recession will be driven by a reduction in the real disposable income of households."
• On the interest rate outlook: "I would be very cautious about promising that interest rates would start falling soon. It may happen that inflationary pressures disappear sharply, then reductions would be on the table. But I wouldn't promise or indicate anything like that at the moment."
• On the FX outlook: "The fact that the big central banks will probably raise rates further means that nothing new for the koruna results. Personally, I would maintain that there is no significant reason for the koruna to fluctuate significantly or for it to weaken."
• Reminder that President Milos Zeman tapped Frait to become the central bank's Deputy Governor when Marek Mora's term expires in mid-February.