Czech Central Banker: Inflation Will Accelerate due to Ukraine Crisis

Inflation in the Czech economy will accelerate, mainly due to the impact of the Ukraine crisis on energy prices, and it could go above 11%, Czech National Bank board member Tomas Holub said.

Therefore it is important to preserve the public’s belief that inflation will return to the central bank’s 2% target, Holub said in an interview published by the Hospodarske Noviny daily paper on Tuesday.”I thought some while ago that inflation would surpass 10% in April or May, but that it certainly won’t go over 11%. I am definitely losing that certainty now,” Holub said.

“We have to put stress on people not losing their faith, even under these extreme conditions, that inflation will go significantly down next year,” he said.

The Czech National Bank has lifted its benchmark rate by 425 basis points to a 20-year high of 4.50% since last June. That has included 375 basis points worth of hikes at the last four meetings.

This brought the central bank to a comfort situation, where the board could just fine-tune rates and choose between 25 and 50 basis points for the possible next rate hike, Holub said.

The bank, the most aggressive among central European peers in tackling sharp price growth, has signaled a slowdown in its tightening even as inflation soared to 9.9% in January.

With price growth so fast, inflation concerns take precedence over worries about affecting growth, Holub said.

“As long as we have 10% inflation, I can’t act otherwise. But that does not mean that we will go further brutally up with the rates, because we have already gone a large part of the way.”

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