PRAGUE (Reuters) – The Czech National Bank’s monetary policy has been having a restrictive effect on the market although further tightening cannot be ruled out, the bank’s Vice-Governor Jan Frait said on Thursday.
The central bank has kept its main interest rate at a high 7.00% since last June. Some board members and analysts have argued that the rate should have gone higher to help keep inflation expectations in check.
“Lately, the (central bank’s) monetary policy has been very restrictive,” Frait said in an article co-authored with board adviser Jakub Mateju, posted on the central bank’s website.
“Both main components of monetary conditions affect the economy and inflation in a way which subdues demand, and thus the inflationary pressures too. It cannot be ruled out that the restrictiveness of monetary policy could show as insufficient in the coming months,” they said.
Frait and Mateju said further tightening could come via interest rates or crown exchange rate conditions, without giving details.
The bank has had a pledge since last May to intervene “to prevent excessive fluctuations of the crown”, which it has used to prevent significant weakening, although it was able to stay out of markets in recent times as the crown scales more than 14-year highs.
In the article, Frait identified accelerating wage growth, inflation decreasing too slowly in core items, or rapidly reviving loan dynamics as possible signals for more tightening.
The central banker has voted with the majority for stable rates since he joined the board last July.
(Reporting by Jason Hovet and Robert Muller; Editing by Hugh Lawson)
