PRAGUE — The Czech National Bank should keep interest rates unchanged at the moment as the mortgage market has plummeted, and signs of inflation nearing its peak were only fragile, board member Oldrich Dedek was quoted as saying on Thursday.
Dedek has voted in the minority for stable rates throughout the central bank’s year-long tightening cycle which raised the main rate by 675 basis points in total, ending in June.
Since then, the two-week repo rate has stood at 7.00%, although the annual inflation rate has risen to 18%, pushed mainly by soaring energy prices affected by gas and oil delivery disruptions and Russia’s aggression against Ukraine.
Dedek pointed to flat core inflation, and to central banks across the world speaking more and more about recession, as factors for rate stability.
“At the moment, rate stability is favorable,” Dedek said in an interview published by the Ekonom weekly business magazine.
“Cuts can be considered when disinflation pressures begin to manifest and inflation will be returning to its 2% target,” he said.
Governor Ales Michl, Dedek’s sole ally voting against hikes before he assumed the top spot on the seven-seat board in July, has maintained his support for rate stability in his new role.
With three new members, the majority has swung, and the revamped board kept rates unchanged at the last two meetings in August and September. The next decision is due on Nov. 3.
Dedek said that although data from the domestic economy suggested that the peak of inflation could be close, the signals have been “fragile” so far. He also said that when that point was reached, an end to the central bank’s interventions to prop the crown currency, in place since mid-May, could be considered.
“Until then, I would be cautious with leaving the foreign exchange rate open to market forces,” he said. (Reporting by Robert Muller in Prague Editing by Matthew Lewis)