The Czech central bank expects only a limited economic fallout from the worsening pandemic and remains prepared for more interest-rate increases to curb surging inflation, according to one of its vice governors.
The country “has learned to live with Covid” and potential lockdown measures are unlikely to significantly hurt consumption and investments, Marek Mora said in a video posted on the central bank’s website. Policy makers are obliged to tackle the fastest consumer price growth in 13 years to prevent inflation expectations from
getting out of control, he said.
While the nation of 10.7 million people is grappling with one of world’s worst rates
of new Covid-19 infections, a shortage of workers and a
generous fiscal stimulus keep boosting wages, consumption.
The Czech National Bank has led policy tightening in the European Union with 250 basis points of rate increases so far this year, including a surprise 125 basis-point hike on November 4.
“We must not allow a situation in which economic actors would believe that inflation remains elevated for the long term,” said Mora. “If necessary, we are still ready to keep raising interest rates in line with our fall forecast.”
Mora’s comments appear more hawkish than those made by Governor Jiri Rusnok, when he told Reuters the pace of tightening could now slow down and he could even “imagine” leaving rates unchanged next month.