Interview of Vojtěch Benda, Bank Board member
By Robert Müller (Reuters 14. 9. 2020)
The Czech National Bank does not need to ease monetary policy further despite a fresh surge in coronavirus infections in the country, as steps taken to mitigate the pandemic are likely to be milder than those taken in spring, board member Vojtech Benda said.
The central bank cut interest rates by 200 basis points to 0.25% in the spring to help the economy after it was hit by lockdowns across the world, and it then took a pause at its last two monetary policy meetings.
"For us, the situation is clear now in terms of monetary policy, the easing which we have delivered at the onset of the pandemic is sufficient," Benda told Reuters in an interview.
"Rates will remain unchanged for an extended period of time."
The Czech Republic fared relatively well in its initial outbreak of the new coronavirus compared with western Europe, and its death toll has stayed lower than most.
But a domestic lockdown combined with a slump in foreign demand knocked economic output down by 11% in the second quarter compared with the same period last year.
Benda said that this is not likely to happen again despite the recent surge in new infections that have far outpaced the spring peak.
"According to hints by government officials ... it seems that the blanket lockdown will not be repeated. That is good news for the economy," Benda said.
He opposed the government's plan for a major personal income tax cut that could reduce annual public sector revenue by around 70 billion crowns ($3 billion) or 1.2% of economic output from the next year.
"Significant tax cuts won't help the economy now, it won't do public finance any good," he said, adding that such moves help when taxation is high but that this is not the case in the Czech Republic at the moment.
"The market would of course see an incautious approach to a gradual lowering of the deficit as something which could be reflected in higher yields on government bonds," he said.