By Peter Laca, Francine Lacqua (Bloomberg 12. 6. 2026)
Czech National Bank Governor Aleš Michl said in an interview with Bloomberg that the arguments for raising interest rates at the June Bank Board meeting have strengthened. The Czech economy is facing domestic inflationary pressures – robust wage increases, persistent growth in prices for services and housing and an increase in the money supply. Although headline inflation slowed to 2.1% in May, core inflation remained elevated at 2.9%. A potential rate increase would represent a calibration of the degree of restriction rather than a fundamental shift in the monetary policy stance. “We are not deciding whether to switch to a tight policy. It is already restrictive. We are deciding how tight the policy should be.” Michl also rejected the suggestion that the Bank Board’s decisions would be swayed by political statements. “I guarantee our independence. No one tells us what to do.”
Czech central bank Governor Ales Michl said he sees a stronger argument to raise interest rates in June to contain inflationary pressures.
The Czech economy is facing domestic risks from robust wage increases, as well as persistent growth in prices for services and housing, he told Bloomberg News in an interview a week before the rate meeting.
The central bank also needs to slow an increase in the money supply, which is driven by rising household credit and a fiscal deficit, according to the governor.
“The case for a rate hike has strengthened,” Michl said in London on Thursday. “A June move is now a live possibility.”
A rate increase would be the first one since Michl took office four years ago. It would also put him on a collision course with Prime Minister Andrej Babis, who has repeatedly urged policymakers to lower borrowing costs because he considers their current level to be a barrier for more lending and the reason for expensive mortgages.
The bank needs to decide how tight the monetary setting needs to be to tackle upside risks to core inflation, according to the governor.
The Czech Republic entered the period of the oil shock with headline inflation below target. Policymakers, who have held the key rate at 3.5% for a year, said that they wouldn’t react to the primary impact of higher energy costs, but would closely. watch out for a potential spillover into broader consumer prices.
Headline inflation slowed more than analysts expected to 2.1% in May, matching the central bank’s own forecast for the month. But while highly volatile food items continued to dampen overall price growth, the central bank said that this trend was likely to reverse later in the year.
The closely watched core measure, which tracks domestic demand pressures, stayed at what the central bank called an elevated level of 2.9%.
“We still need to fight core inflation,” Michl said.
The market started betting on monetary tightening after the Iran war erupted. Forward rate agreements now indicate expectations of between three and four quarter-point hikes over the next 12 months and investors have also boosted bets on the first increase coming as early as next week.
A potential increase this month “would be a policy adjustment - something like calibrating the degree of monetary policy restriction,” Michl said. “If we do hike, my baseline is that we may then enter a period of assessment for some time.”
He declined to provide longer-term guidance or comment on market expectations beyond the June 18 meeting.
The bank’s projection still points to a “low-inflation environment,” Michl said, adding that he expects the next update of the bank’s forecast to show a lower estimate of economic growth for this year.
The governor was speaking shortly after the European Central Bank lifted borrowing costs for the first time since 2023 on Thursday. ECB officials haven’t ruled out a second increase as soon as at their next meeting, Bloomberg News reported.
While the Czech National Bank takes decisions of major global counterparts into consideration, the latest ECB move isn’t the deciding factor for next week’s meeting and the outcome will be based on the board’s own assessment of risks, according to Michl. The Czech central bank’s advantage is that with the key rate now at 3.5%, policy is already restrictive, he said.
“We are not deciding whether to switch to a tight policy,” he said. “We are deciding how tight the policy should be.”
Addressing the prime minister’s criticism, Michl said the central bank’s decisions won’t be swayed by political statements. “I guarantee independence,” he said. “No one tells us what to do.”
Interview on Bloomberg TV
The chief of the Czech central bank, Aleš Michl, has said that he sees a strong argument to raise interest rates to contain inflation. Now, a potential rate increase could put the central bank on a collision course with the Czech Prime Minister, who urged policymakers to lower borrowing costs. The Governor, Aleš Michl, joins us now for an exclusive conversation. Governor, thank you so much for joining us. Now, first, this is a big week, because the ECB yesterday raised interest rates. What kind of impact does that have on your country?
Good morning, Francine, and thank you very much for having me. Our next decision, which will be next week, will be based on our own risk assessment. The ECB decision will not affect our next step. Our key rate has been 3.50% for more than a year. We have not cut rates below inflation in this cycle, which is very important. So for us, this is not the problem. The real problem is that there is too much money in the economy. It was created by years of zero rates and negative real rates before COVID, and it was supported by fiscal deficits. This is still pushing core inflation higher. We have to stay hawkish forever.
We’re trying to analyse what’s happening in the Middle East. And frankly, it’s unclear, because every couple of days there’s negotiations. We’re not sure where it ends. Sometimes it changes. How much real inflationary pressure do you see from the price of oil?
Wars tend to increase inflation, definitely. They bring more spending, bigger deficits and more pressures on prices.
Could that be short-lived? Again, there’s many questions on whether, if Iran gets resolved, which we don’t know at this point, but if it gets resolved quite quickly, does it really help with inflation on the short side?
With cost inflation, yes. When I became governor of the Czech National Bank – it was in mid-2022 – inflation was close to 20%. Twenty per cent. We reduced it to around 2%. And for more than two years now, inflation has been close to our target. So we restored price stability and we will protect it. But current inflation right now in the Czech Republic is 2.1% year on year, rates 3.5%. Which is our big advantage. So our policy is already tight. But right now it’s about deciding whether to switch to a tight policy. Core inflation is 2.9%. We are fighting this core inflation right now.
But so, Governor, are you ready to support a rate increase as soon as next week when you meet?
I think a June move is now a real possibility. The case for a rate hike has strengthened. Forever hawkish.
Governor, one of the other things I wanted to talk about was Bitcoin, because in November 2025, of course, the Czech National Bank made its first ever purchase of crypto assets, mainly Bitcoin. What have you learned so far from running this test fund?
A central bank and Bitcoin – it’s a strange combination, isn’t it? Most people do not put these two things together. I do. My logic, or my philosophy, is that in monetary policy, a central bank must be conservative. For me, that means hawkish forever, higher rates for longer, no quantitative easing, no currency devaluation. That’s conservative monetary policy. But a central bank must also think ahead. And in operations, we must innovate. We must try to understand the future. That’s why we created a test portfolio. It’s a test portfolio, not a revolution, not a political statement. A test. It’s a one million dollar test. Our FX reserves are 180 billion US dollars. We will run this test for two years and gain experience. As you ask, I see only two possible outcomes for Bitcoin: very high value, or zero.
Is this a surprise? I understand it’s a test and it’s only for two years, but what portion of the reserve could you imagine holding in Bitcoin in the future?
We will decide after the test, after two years. Right now, I would like to say that I’m not a crypto governor, definitely, because I expect a hard shakeout in crypto. There may be a wave of failures. But on the other hand, there will be strong companies and strong technologies which survive, definitely. So there will be some process of creative destruction in this part of the economy. But let’s understand the future. Let’s create the future. I’m there for the future.
Governor, you are quite innovative. What you’ve done is very innovative. The change in reserve management is a shift to basically increase the portion of equities and gold. And that’s happened. What results is this new approach delivering?
Our investment horizon is infinite. That’s why we made two long-term moves: increase the equity allocation from 8% to 26% of our FX reserves, and increase our gold from almost zero to 6.5% of our reserves. And the results last year: the return was 10%, the same as Warren Buffett’s result. So far, so good, I would say. But one year is not enough to judge a portfolio. Warren Buffett built his reputation over more than 50 years. So ask me again in 50 years.
I hope to ask you next year. I hope this is not in 50 years. The portion of stocks, as I understand it, will also increase to about 30% of the total reserves by 2029. And a lot of that chunk is US stock market. So what is your strategy for US equities, especially at a time where everything is changing because of SpaceX today?
With the investment horizon, which is infinite, we do not focus on short-term bubbles. We stay with our strategy. We have built the portfolio for the long-term future. We have a high expected return because of the US stocks. The portfolio is for, maybe, the next 50 years.
Do you worry about valuations in AI and tech in the US?
I’m not focusing on short-term bubbles right now. It’s a long-term portfolio for our kids.
Governor, really great to speak to you. Very refreshing view. Thank you so much for joining us here in London in our studio. That was Aleš Michl, the Governor of the Czech central bank.