Interview with Jan Kubíček, Bank Board member
By Peter Laca and Krystof Chamonikolas (Bloomberg 18. 6. 2025)
Czech National Bank board member Jan Kubíček told Bloomberg that further interest rate cuts are not warranted under current conditions. In his view, the Czech economy does not currently need monetary stimulus – core inflation remains elevated and domestic demand is strong, especially household consumption. Jan Kubíček warned of risks in the property market, where prices have been growing at an unsustainable pace, and emphasised that the central bank has essentially reached the neutral rate. A further shift in the direction of monetary policy, he said, would require a significant external shock.
Interview
The Czech central bank may have to refrain from lowering interest rates any further because sticky inflation requires restrictive monetary conditions, according to board member Jan Kubicek.
Policymakers in Prague last cut borrowing costs in May, bringing the benchmark rate to 3.5%, the lowest level since 2021. The board wasn’t in agreement then whether the reduction was the end of the easing cycle that started a year and a half ago.
“I think the room that I saw before has been exhausted,” Kubicek, who voted against the last cut, said in an interview on Tuesday before the June 25 rate decision. “Unless some external circumstances emerge and cause a major decline in domestic demand, I don’t see the need to stimulate the economy further with monetary policy.”
While the headline consumer price growth has settled within the Czech National Bank’s tolerance range, policymakers are focusing on core inflation. That measure of underlying domestic demand pressures remains elevated and may even temporarily exceeded the 3% this year, according to Kubicek.
“This is a bit of a warning sign for me that the disinflation process has stopped, or even reversed, in the core segment,” he said. “We shouldn’t get used to the fact that core inflation is moving around 2.7%.”
Persistent price growth in services remains the main risk. While the pressure in the hospitality sector has been cooling somewhat, the impact of the so-called imputed rents — a proxy figure from housing costs — is becoming more prominent.
‘Unsustainable Pace’
“The property market, to my taste, has been growing at an unsustainable pace,” said Kubicek. “Especially the double-digit price increases can’t last. We have seen several asset bubbles in various countries in the past, and they usually didn’t end well.”
Central bankers have discussed whether to address the surging housing costs with stricter rules for mortgage lending. But with about half of homes being bought without a mortgage, and most borrowers meeting the limits anyway, such a move probably wouldn’t cool the market, according to Kubicek.
“If such measures aren’t able to deliver a more surgical impact on demand for housing, then for me the property-market trend is an argument for using monetary-policy rates,” said 48-year old policymaker.
Kubicek added he could see some disinflationary factors in the economy, including a slightly stronger-than-expected koruna or a recent uptick in unemployment. Still, domestic demand, and especially household consumption, is rising at a relatively swift pace and doesn’t need help for even lower rates, he added.
‘Neutral Rate’
While corporate investments have been lagging, the latest data show some recovery, and surveys indicate that businesses don’t see the current borrowing costs as a major barrier for their growth, according to Kubicek.
To justify further monetary easing, the Czech economy would have to be hit by an external shock — such as a full-blown global trade war of “everybody against everybody,” which Kubicek considers unlikely.
“I think we have basically reached the neutral rate,” he said. “I don’t expect the direction of monetary policy to be reversed in the coming months either.”