Aleš Michl, CNB Governor
Prague, 15 February 2024
Today I sent a letter to all CNB staff saying they should be proud of working together for the good of the country.
The new Bank Board started work in July 2022, when the annual inflation rate was 17.5%. We changed monetary policy strategy and succeeded in lowering inflation considerably. The Czech Statistical Office announced today that the annual inflation rate in January was 2.3%. We have restored price stability, our legal mandate. In the speech I gave on my appointment as governor in May 2022, I said that the goal would be to gradually return inflation to 2% and that I assumed this would take two years. I thank everyone at the CNB for helping me keep the promise I made when I was appointed governor.
Let’s stay hawkish and do our utmost to achieve price stability. Core inflation is still high. The weakening koruna is an upside risk to inflation. The public finance deficit is an upside risk. These are arguments for lowering interest rates cautiously and for being able to halt the rate reduction process at any time. We expect rates to be higher than we have been used to over the last ten years or more. The economy needs to be based on savings, not debt (cf. also the debate with regard to Isabel Schnabel / the ECB on public debt and other factors that result in a need for higher rates/higher r*; like the Fed and the BoC, we are discussing this at the CNB).
There will be no celebration, news conference or the like, because the future will judge us not by partial successes but by the long-term results of our work.