Interview of the Deputy Governor Marek Mora
By Robert Müller (Reuters 13. 12. 2021)
The Czech National Bank still needs to hike interest rates more significantly at its December meeting as it battles high inflation, Vice Governor Marek Mora said on Monday, adding he would likely consider a 50 or 75 basis point increase.
Central European policymakers have been lifting interest rates to contain inflation that has surged to multi-year highs.
The Czechs have been one of the most aggressive, delivering rate hikes totalling 200 basis points at the last two policy meetings, the biggest moves in over two decades.
The key two-week repo rate now stands at 2.75% -- higher than before the COVID-19 pandemic -- and rate setters have signalled more moderate rises.
Mora told Reuters the latest inflation developments, with the headline rate hitting a 13-year high of 6.0% in November, meant the central bank could not wait for too long with another strong move.
"The inflation development is a factor for not waiting too long, and we will have to do something a little more significant in December," Mora said.
"I thought just 14 days ago it could be one of those rather standard meetings (in December), but I fear now that it won't be that standard. I have the feeling I will choose between (an increase of) 50 to 75 basis points."
The region's policymakers face ever-growing inflation fuelled by external factors like supply chain disruption and higher energy costs, along with tight domestic labour markets.
Mora said wage pressure showed no sign of easing, and added the economy could post stronger growth than expected in the fourth quarter despite a resurgence of COVID-19 cases and weaker production in the car sector.
Markets had scaled back rate expectations in November after Governor Jiri Rusnok told Reuters the bank could possibly consider a rate pause this month.
Market pricing has started rising again, though, with forward rate agreements seeing chances of a 50 basis point hike.
Rusnok told daily Mlada Fronta Dnes on Saturday he expected debate over a standard 25 basis point hike or a 50 basis point rise.
Board member Tomas Holub said on Sunday he could support a 75 basis-points hike.
Even with the outlook for higher rates, the crown remains off its 2021 highs, and below central bank assumptions, which Mora said was an inflationary risk.
But he said he still saw inflation returning to the bank's 2% target in early 2023 and, "theoretically", the tightening cycle could end at the policy meeting in February next year. "But if it will be, I am not sure," he said.