The head of the Czech central bank, Ales Michl, called on the government to balance its budget to help prevent any future resurgence of inflation.
In an interview with CNN Prima News on Sunday, Michl said that those responsible for monetary policy in Prague want to maintain a restrictive monetary stance to curb the debt of households, companies and the State. They suspended interest rate cuts last month to assess new data and the economic outlook, and will decide next steps at the next meeting in February, he added.
Against a backdrop of inflation slightly above the 2% target set by the Czech National Bank, the country’s governor is doubling down on his preference for restrictive monetary and fiscal conditions despite anemic economic growth. Prime Minister Petr Fiala’s government has adopted one of the most aggressive austerity programs in Europe, but has not completely eliminated the budget deficit due to high spending on defense and infrastructure.
According to Michl, the fiscal gap is a source of persistent pressure on prices, along with rising utility costs and an incipient recovery in the real estate market.
“The greatest inflationary risks are the state budget deficit and the excessive amount of money in circulation,” he stated. “We are not in crisis, so we need to have a balanced budget. That is the best way to fight inflation.”
