Interview of Tomáš Holub, Bank Board member
By Kryštof Chamonikolas and Peter Laca (Bloomberg 16. 9. 2024)
Czech central banker Tomáš Holub, a veteran policymaker who has backed robust monetary easing, called for a round of further cuts before he leaves the body’s rate setting panel later this year.
A vacancy left by Tomáš Holub after nearly a quarter century in senior positions of the Czech National Bank would give Czech President Petr Pavel an opening to name a new board member later this year. Recently one of the seven-member panel pushing for more cuts, Tomáš Holub said policymakers have room to reduce rates to 4% from 4.5% in their next two meetings, his last. “It would be premature to end or pause the rate-cutting cycle now,” Tomáš Holub said in an interview in Prague. “The economy is bouncing from the bottom but in a very hesitant way.”
The central bank under Governor Aleš Michl slowed the pace of easing last month, a move backed by Tomáš Holub, with several policymakers expressing concern a weakening in the koruna could trigger inflationary pressure. And while Tomáš Holub’s comments on cutting align with market expectations, they lean harder than a central bank forecast from August that foresees a pause in reductions.
Tomáš Holub, 50, declined to comment on the reasons behind his departure at the end of November after one term on the rate-setting board. He joined the CNB in 2000, after which he served in roles including chief economist and head of the monetary-policy department. He was appointed to the top panel in 2018.
A new appointment would be Pavel’s first to the central bank since taking office as head of state in March last year — and may be his only one this term. All seven current board members were appointed by his predecessor, Milos Zeman, who was a vocal critic of the previous board’s tight policy stance.
Inflation Risks Receding
Tomáš Holub argued that a combination of wage growth below the central bank’s forecast, subdued private spending and weaker-than-expected demand for Czech exports are likely to keep inflation near the official 2% target this year and next. Beyond that, the stronger easing push by the US Federal Reserve and European Central Bank will ease pressure on the Czech currency.
“In this global context, we can continue with our rate-cutting cycle without creating pressures on the koruna,” Tomáš Holub said. “Looking at the economy, I personally can’t see a risk of a rapid resurgence of demand-driven inflationary pressures.”
Tomáš Holub made clear that he would stand by a steady progression of rate cuts on the back of a recent worsening outlook for domestic economic growth and broader easing in inflation, making way for policymakers to ease further. “I personally will have an internal dilemma on whether to cut by 25 or 50 basis points” at this month’s meeting, he said. “I can’t speak for the rest of the board, but I would rather expect a consensus to continue with the standard 25 basis-point steps.”
Industrial sectors that underpin the Czech Republic’s export economy are grappling with weak demand, particularly from Germany. Tomáš Holub said the surprise resilience in the dominant automotive segment has more to do with an order backlog that was affected by supply-chain disruptions. A higher-than-expected price-growth reading in August meanwhile was caused by volatile food costs — and remains close to target, he said. Services inflation — long considered the biggest risk — is also showing signs of a gradual slowdown, he added.