CNB Board Meeting of 28 May 1998

At its session on 28 May 1998, the CNB Bank Board evaluated current inflation development in the CR as relatively favourable. If this trend is maintained in the forthcoming months, meeting the inflation target for this year will be realistic. The Bank Board stated that favourable inflation development in the upcoming period will be fostered by a gradual reduction in domestic demand. At the same time, it emphasised that positive trends were strengthened by an extraordinarily favourable external environment, particularly the development of raw material prices and increased demand on foreign markets. However, the continuation of these favourable factors is not guaranteed and their potential deterioration could threaten the existing trend. Further risks of economic development deterioration follow from the tendency of the state budget towards deficit, from inadequate wage growth relative to labour productivity in the production sector and, in the medium-term, from potential renewed deterioration of the balance of trade which could be accelerated by developments in some foreign economies. After a comprehensive evaluation of the most recent trends and taking into account the above risks, the Bank Board decided to maintain the present setting of monetary policy parameters.

CNB - M. Švehla