In a bid to curb inflation, Czech central bank governor Ales Michl has called on households and the government to cut spending so politicians don’t have to raise interest rates. Bloomberg reports it.
Inflation in the Czech Republic will slow down significantly from the spring and thus the 2% target for 2024 will be achieved. This is what the Czech central bank expects if the Czech currency – the koruna – remains stable. Michl, who made the remarks during a debate on CNN Prima News, also warned that the central bank would tighten monetary policy if price pressures mount in the Czech Republic.
Since Michl became central bank governor in July, interest rates have remained stable. He had previously spoken out against the interest rate hikes initiated by his predecessor. “Interest rates will remain higher under my government than they have been for the past decade to encourage saving,” he said.
‘Stop spending money’
“The most important thing is that families actually start saving money, stop spending it,” he continued. ‘Things are going well so far. Household spending is decreasing and this is good news, because it puts a brake on inflation”.
The consequences of this will soon become clear, he stressed. You pointed to a cooling housing market and slowing wage growth. And while a strong krone further dampens inflation by making imports cheaper, the central bank isn’t afraid to tighten policy if potential wage changes lead to higher spending
Government
Where Michl called on families to spend less money, he had the same message for the Czech government. According to Michl, the government should be careful about increasing spending on subsidies and support packages, because this would counteract a tight monetary policy. “It is in the Czech Republic’s interest to keep the budget deficit as low as possible,” she said.
Source: BNR
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