Czech Central Bank Governor Discusses Inflation and Economic Recovery

Consumer price growth peaked last September, when the year-on-year inflation rate was 18 percent. From February of this year, in line with the expectations of the central bank, a gradual downward trend began, CNB Governor Aleš Michl said at a press conference.

At the same time, he added that if inflation, which reached 15 percent in March, does not fall quickly enough, the Bank Board is prepared to raise interest rates at the next monetary meeting.

“Overall and core inflation are at unacceptable levels. The Banking Council thus confirms its determination to continue the fight against inflation until it is fully under control, i.e. stabilized at the two percent target. So interest rates will remain at a relatively high level for some time,” said Michl.

“The condition for long-term price stability is, first of all, a responsible budget policy and a moderate wage development,” the governor noted, adding that the path to lower inflation leads mainly through the reduction of the state budget deficit.

“Fiscal responsibility is a very important topic for us right now,” he added.

This year’s state budget deficit reached exactly 200 billion crowns at the end of April. The government expects a deficit of 295 billion for the whole year, but according to economists it will probably be several tens of billions more.

For next year, the CNB expects economic recovery, GDP should grow by three percent. As in the case of this year (+0.5%), the central bank also improved its forecast compared to February, when it expected economic growth of 2.2% next year.

The CNB left the estimate of average inflation in 2024 at 2.1 percent.

The central bank also improved the prediction of the average exchange rate of the koruna. For this year, it expects 23.70 CZK/EUR, in January it stated 24.5 CZK/EUR. Next year, according to the CNB forecast, the koruna should weaken to an average of 24.30 CZK/EUR.