Transcript of the questions and answers from the press conference

If I understood correctly, the Bank Board sees the risks as modestly inflationary with respect to keeping the inflation target. The inflation outlook remains unchanged due to rising services prices, which is a relevant part of the consumer basket for the Czech National Bank. At the same time, several members of the Bank Board had already indicated before today’s meeting that they would be very cautious about any further rate cuts. And that if a cut is made, then it could be the last cut in this cycle. In your statement, too, you said that inflation was limiting room for further cuts. Could you quantify how likely it is that this was the last cut for the foreseeable future, perhaps in this cycle or at least for the next few months? Because the financial market and even the forecast still anticipate a few more cuts, say, by the end of this year.

You won’t hear any such commitment from me now, because there is no consensus yet on whether this was the last cut or not. What we do agree on is that the space for cutting interest rates is limited and any further cuts will depend mainly on the inflationary risks in the domestic economy diminishing. We will assess this at each meeting, which is why we are keeping all options open. That’s the most honest answer I can give you right now.

I’ll turn my colleague’s question around a bit and ask the opposite. Given that you keep emphasising the continuing inflation risks or pressures, why did you lower rates today after all? One could argue that you had the option to wait for more data, the development of trade wars, and to cut any time later – say, in June. So, what made the majority of you decide to do so today?

Two arguments. First, the level of interest rates is still restrictive. So even after today’s cut, rates are still acting in the direction of reducing future inflation in the Czech Republic. That’s why we could afford today’s cautious rate cut. The second reason is that the risk of imported inflation from abroad has dropped significantly.

I’ll just follow up on what my colleagues said with a supplementary question. You referred to yesterday’s flash inflation estimate of 1.8%. How surprising was that for you? Because the market was surprised – one might even say caught off guard. How much did that influence today’s decision?

When I was appointed, inflation was 17.5%. We have gradually managed to bring it down to 2%. This 1.8% is a fantastic success. It’s the first time in seven years that inflation in the Czech Republic has been this low. At the same time, and that’s the precise answer to your question – it’s all in the past.

So personally, I can say that for me it had no impact on how I decided and how I voted. A great success, yes – but it’s all in the past. The important thing is to ensure that future inflation in the Czech Republic isn’t high again.