Transcript of the questions and answers from the press conference

The balance of risks has shifted in the inflationary direction. Your forecast, or its baseline scenario, implies an increase in interest rates in the relatively near future, already in Q2. What were the main arguments prevailing today for not proceeding with a rate increase already at this meeting? And more generally, is the probability that the next rate move will be upwards increasing?

In addition to the baseline scenario, we discussed an alternative scenario which conversely suggests that rates should be reduced and which assumes a recession in the European economy, or rather a slowdown in economic growth. All the scenarios will be published and presented. This is the main argument for keeping interest rates at their current level for the time being. They are still sufficiently high; our stance is tight – we are considerably tighter than, for example, the euro area. However, we have indeed reassessed the risks, increasing them in the inflationary direction, which indicates that at the next meeting we will discuss whether to keep interest rates unchanged or raise them.

Just regarding the outlook. Given that you have revised this year’s trajectory of the economy downwards, and also in light of the statistics released today by the Czech Statistical Office on industry, construction and foreign trade, do you expect household consumption to remain the main driver of the Czech economy?

Yes, I expect household consumption to be the main driver, but the statistics also point to a potential slowdown in economic growth. Not only the data you mentioned, but also the GDP growth figures for Q1. However, we don’t want to underestimate anything. Our primary objective is low inflation. Inflation will therefore always remain our top priority, and we will do everything necessary to keep it low. If it becomes necessary to raise rates, we will do so, but our present stance is very tight.

Today, the Norwegian central bank raised its key interest rate somewhat unexpectedly. As you mentioned that you will be monitoring major foreign central banks, could this be a source of inspiration for your future monetary policy considerations?

Yes, one can look at Norway or Australia; on the other hand, one can look at the euro area or the United States. Approaches differ. At present, however, our policy rate is 3.50%, while in the euro area it is 2%; even if they were to increase it, it would be 2.25%. So, we are currently maintaining a tight stance. Nevertheless, we will continue to assess what other central banks are doing and, above all, what impact this has on our region, the Czech Republic.

You mentioned that today you discussed an alternative scenario that envisages potential slower growth or a recession and thus lower rates, and that this was an argument for leaving rates unchanged today. Was there also any discussion today about a possible increase in light of the forecast, which – according to the chart – appears to indicate an increase of about 50 basis points in Q2, possibly starting as early as today? My second question concerns fiscal policy. Although I know you don’t like to comment on unfinished, unenacted legislation, there is a clear intention by the government: at the third reading in the Chamber of Deputies there is an amendment to the budgetary rules which, according to the Czech Fiscal Council, could open up a very substantial scope for an additional fiscal impulse to the economy, potentially in the order of CZK 200 billion compared with a scenario under the existing budgetary rules. I would appreciate your comment on this, if you are willing to comment despite it not yet being enacted legislation.

As regards a rate increase, we did not discuss it explicitly, but I sensed from the discussion that a number of Bank Board members are keeping the door open, so to speak, to a possible increase in interest rates if core inflation continues to rise, if the conflict does not stabilise and there is a risk of its effects spilling over into other items in the consumer basket, or more generally feeding through more widely into inflation in the Czech Republic. That is how I perceived today’s debate. As for fiscal policy, I am sorry, but it is not for me to comment on fiscal policy.

Apologies – then perhaps the possible impacts of fiscal policy as a risk to inflation and monetary policy?

Yes, it holds that an increase in the deficit is a factor that may raise inflation in the Czech Republic. That is all.