Interview of Eva Zamrazilová, CNB Deputy Governor
By Krystof Chamonikolas and Peter Laca (Bloomberg 13. 12. 2023)
A Czech central bank deputy governor said the country’s first interest-rate cut since May 2020 is on the table, though price increases expected at the beginning of next year remain a concern.
Eva Zamrazilova, who sits on the Czech National Bank’s seven-member board, said the path toward easing is in sight. Inflation is on track to drop toward 3% early next year from a peak of 18% in September of 2022, household consumption remains “very subdued” and a wage-price-spiral risk has mostly evaporated, she said in an interview.
Still, the unpredictable nature of price jumps that commonly take place at the start of the year gives her pause about whether to deliver a cut at the Dec. 21 meeting.
“Uncertainty regarding the January repricing has not significantly diminished,” Zamrazilova said at the bank headquarters on Tuesday. “So the December meeting is 50-50 for me at the moment — and I don’t know yet how I’m going to vote.” Policymakers in Prague have been looking for the right moment to join peers in Hungary and Poland in easing. Data point in that direction, with declining real wages, fiscal tightening and demand for exports softening — factors that have put the $300 billion economy on the brink of recession. Two Czech board members sought a quarter-point cut last month.
But the central bank has been cautious, weighing a tight job market and the specter of price increases. Government and monetary officials have pushed back on plans by supermarket chains to raise food prices in response to higher energy and labor costs.
Zamrazilova said that if she were to approve a cut, it would be no more than 25 basis points, with policy remaining “very restrictive.”
“The main question now is whether retailers will take advantage of the confusion around energy costs to raise prices,” said Zamrazilova. “With farmers’ and food producers’ prices declining, there is absolutely no reason for them to do that, other than to protect or further inflate their profit margins.”