© Stocksak. FILE PHOTO A clock showing noon is pictured next to nearly empty streets in Old Town Square during the coronavirus (COVID-19), outbreak in Prague, Czech Republic on March 31, 2020. REUTERS/DavidW Cerny/File photo
PRAGUE, Stocksak – Czech inflation is likely to stay high through the year-end but should not rise much further, Karina Kubelkova (central bank board member) said in a newspaper interview that will be published Monday.
Kubelkova joined the board in July and stated that a rise in domestic consumption would indicate the need to tighten monetary policy further, but this was not the case.
“Latest data show that people have stopped spending and consumption is beginning slow,” she said to daily Lidove Noviny in her first public comments since joining the board.
The bank ended a previous cycle involving rate hikes under the new Governor Ales Michl. He also assumed his post in July and signaled that rates would remain stable for a long time. The bank had raised its main interest rate to 7% in June and inflation was 18% year-on year in September.
Kubelkova reported that wage growth surprised at the positive end in the second quarter. However she stated that she wasn’t worried about a wage inflation spiral like some of her board colleagues. She expected a compromise between the unions and employers in wage negotiations.
Kubelkova stated that the central bank’s long-running market interventions to support the crown currency’s exchange rates were an exceptional tool that helped to reduce the bank’s large balance sheet, which had grown over the years.
She stated that data showed that the bank did not intervene in August and that she believed that the crown’s exchange rate would remain roughly the same as it is now, even without intervention.
The crown, supported by billions of euro in interventions over the past months, has outperformed its regional peers, the Hungarian forint, and the Polish zloty. It is stable at around 24.5 euros, up 1.4% this year, but it is still under pressure.