Zeman appoints economist and member of the Bank Board, Aleš Michl, as the new CNB Governor Business

Forty-four-year-old Michl was in the narrow circle of favorites for the head post at the central bank. Besides him, the current vice-governors Tomáš Nidetzki and Marek Mor were also speculated, and the name of the president of the Chamber of Commerce, Vladimír Dlouhý, also fell.

Michl has long been in opposition to most members of the CNB’s Bank Board, which decides on setting interest rates. All key votes on rate increases recently ended in a 5: 2 score. So five votes to raise and two to stay. One of the opposition was Aleš Michl, the other Oldřich Dědek.

Both have long argued that high inflation, which rose to 14.2 percent in April, is largely “imported”. That is, caused by high prices of imported commodities, raw materials and energy. And that raising interest rates in these circumstances will only damage the Czech Republic’s economic growth.

“In order to stabilize inflation expectations, it is necessary to explain that it is temporarily caused by a cost shock, which will subside as trade relations between suppliers and customers return to normal in the world economy,” said Michl and Dědek last October. in the commentary for MF DNES and since then they have voted in favor of this minority view.

Concerns are growing among economists that Michl, at the head of the central bank, will prevent further rate hikes or even push them to fall. Even as a governor, he will have only one vote, but the change and the as yet unnamed replacement for Jiří Rusnok may not end the changes in the Bank Board.

At the end of June, the first term of office of Vice Governor Tomáš Nidetzki and Council Member Vojtěch Bend ends. The president may appoint them for another six-year term, or appoint someone else. There is speculation that the president will want to appoint personalities close to the new governor in the council.

“That is why last week the market began to reconsider the outlook for further interest rates in the domestic economy, which also caused the koruna to weaken. From the point of view of foreign investors, higher interest rates mean a higher attractiveness of the koruna and its strengthening, and vice versa, “Jakub Seidler, an economist at the Czech Banking Association, told ČTK.

When the behind-the-scenes information about Michal’s appointment appeared for the first time last week, the koruna reacted by immediately weakening by about 50 pennies over the limit of CZK 25 per euro.

In addition, until the end of his term, President Miloš Zeman may appoint two new “horses” to the Bank Board. At the beginning of next year, the first six-year term of office of Vice-Governors Marek Mor and Oldřich Dědek will expire.

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