CNB statement on the impacts of the current situation in Ukraine

At its meeting today, the Bank Board of the Czech National Bank discussed, among other things, the impact of the military conflict in Ukraine on the Czech economy. The Czech National Bank has been monitoring the situation in detail and assessing it on a continuous basis. As this is a non-economic shock, the future development of which is difficult to predict, it is premature to draw conclusions about the longer-term impacts on the domestic economy, inflation and future monetary policy settings.

However, it can already be expected that the direct impact on Czech economic growth stemming from the country’s trade links with Russia and Ukraine will be limited. This is due to the two countries’ very low share in the exports of goods and services from the Czech Republic (2.3% in the case of Russia and 1% in the case of Ukraine). In the short term, however, an overall inflationary impact of the conflict can be expected, mainly through higher prices of oil, natural gas and, indirectly, of other energies. The koruna exchange rate, which is now weaker than assumed in the winter forecast, will affect the price level in the same direction in the short term.

New information and outlooks for the world economy, commodities, exchange rates etc. will be taken into account in an update to the CNB’s winter forecast, to be discussed by the Bank Board at its monetary policy meeting on 31 March 2022.

The CNB has a sufficient range of instruments it can use should it become necessary to stabilise the financial or foreign exchange market. In the managed float exchange rate regime, the CNB is ready to react at any time to excessive koruna exchange rate fluctuations that would disrupt the smooth functioning of the foreign exchange or financial market or that would jeopardise price stability and financial stability in the Czech Republic. The CNB has sufficient international reserves for the fulfilment of its monetary policy objectives and other tasks.

Markéta Fišerová
Director of the Communications Division and CNB Spokesperson