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The new Czech National Bank Governor and his economic goals

Aleš Michl: restabilising interest rates and facing inflation

On 1st of July, the new governor Aleš Michl and the members of the board of directors took office at the Czech National Bank (ČNB), which will see an increase of three members to a total of seven.

During the previous government period, inflation and interest rates had risen sharply to their highest levels since the late 1990s. Michl claims that inflation will reach 15%, and that the process of lowering it to the normal 2% level will take at least two years.
But, according to the new governor’s words, this will change. That’s why he first claimed that he wants to stabilize interest rates and fight inflation, while maintaining the confidence of Czech investors and the stability of the financial sector.

The price increase is due to external causes and especially energy costs. It is automatic to think that they are due to the Ukraine war but it is not appropriate because the inflation rate increased long time before the Russian invasion was announced.

Regarding the debate on how to face inflation, there are two ways of thinking. The first group argues that the current inflation problem is mainly caused by a demand crisis and argues that raising interest rates is not the best way to solve the problem. The second group says that the causes of inflation are in spending problems, and argues that rising interest rates help to sustain inflation.

Regarding this, the CNB will assess the impact of its monetary policy and other indicators on inflation, before proceeding with other measures to support the economy.

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