According to the President of the Chamber of Commerce, Vladimír Dlouhý, it would be better if the CNB opted for a gradual, not a jump in, interest rates.
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“The chosen option will have a severe impact on entrepreneurs, because they have to deal with the effects of a pandemic and government restrictions, tensions in the labor market and in supply chains. Loans will become more expensive in a situation where many companies have exhausted their financial reserves, when they have been forced to close their establishments, and now they need capital, “said Dlouhý.
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The step of the central bank also unpleasantly surprised the Association of Small and Medium-Sized Enterprises and Self-Employed Persons (AMSP CR). She sees the increase in rates as “an unnecessary blow to the waist for enterprising people”.
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“The CNB did so ruthlessly, arrogantly and hastily. He thinks that expensive loans and mortgages will reduce the price of energy and other input materials. However, the first reactions from companies that are members of the AMSP CR clearly indicate that this is a false expectation, “said Eva Svobodová, the association’s general director. In addition, a member of the AMSP Supervisory Board noted that the CNB is the only bank in Europe that is taking such a drastic approach.
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The Association of Exporters also does not like a significant increase in interest rates, according to which it will not curb rising inflation. A side effect of the rate increase will be the strengthening of the koruna’s exchange rate, which will damage export companies and the entire Czech economy, said Otto Daněk, the association’s vice-president.
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“The CNB uses methods that are according to the textbooks, but it will not have much of an impact. Inflation imported from outside, which is caused by rising prices of components and raw materials, and inflation caused by a drastic rise in prices of all types of energy and fuels will not be curbed, “says Daněk.
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On the contrary, it is of the opinion that higher rates will have a negative impact on the costs of companies using loans.
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The crown strengthened
The koruna reacted to Thursday’s move on Thursday afternoon, strengthening to the strongest level since February 2020, ie before the outbreak of the coronavirus epidemic in the Czech Republic. According to Bloomberg, it strengthened to the level of 25.20 per euro.
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“The strengthening koruna should gradually reduce the price of imports, which will have an anti-inflationary effect. This is one of the ways in which the CNB is trying to curb inflation by raising rates, and more generally by tightening monetary conditions, ”said Lukáš Kovanda, Chief Economist at Trinity Bank. At the same time, however, he added that “the CNB’s monetary policy horizon is 12 to 18 months, so the central bank is only able to influence inflation in this period, ie at the turn of 2022 and 2023 at the earliest.”
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