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The first big decision of NB in ​​the meeting with Governor Michal: the rates will remain at seven percent | Business

Leave the rates at the level that was determined by the council in the previous combination, but it was not certain. Analysts were squeamish about him, even the new governor wrote it when he was named. However, it was not even slightly increased by a quarter and a half percentage point. At the same time, the Banking Council decided that the NB will continue to defend the excessive exchange rate of the koruna.

The previous composition of the council, which was chaired by the former governor Ji Rusnok, dropped the base rate by more than 0.25 percentage points seven times in a row after the above-standard announcement.

The first single bank council after the personnel changes is very unknown to the financial market and will have a big signal effect on the next policy agreement, Deloitte analyst David Marek pointed out the uncertainty surrounding NB’s decision to go ahead.

The banking board decided on a major personnel change. The seven-year-old board has new members since the beginning of the election, and the post of governor was taken over by Ale Michl, only in the position of member of the bank board he always voted against their growth in the current cycle.

The Minister of Finance, Zbynk Stanjura, took a stand next to the banking board. It was a standard appointment of the Minister of Finance, who, on the basis of the NB Act, has the same authority as anyone else, only to adjourn the session of the Bank Council. The minister has an advisory vote, but cannot vote.

Finance ministers have used their ability to separate themselves from one banking board in the past on several occasions. Alena Schillerov last left a bank board in the role of Minister of Finance in August 2021.

Rate stability is good for businesses at first

According to Cyrrus analyst Vát Hradil, the decision to maintain rates is not based on economic reality, as the current value of inflation, the weak exchange rate of the Czech crown, the growth of inflation rates, developments in the Eurozone and data on the Czech GDP all point to the desirability of further rate hikes.

It is therefore a question of how long NB can maintain the stability of dock rates. Domestic inflation reached 17.2 percent in mid-2018 and is the fourth highest in the European Union, with worse rates only in the Baltics. In our country, the price drivers are energy, food, fuel and housing prices.

Petr Kymlika, a partner of the Moore Czech Republic consulting group, on the other hand, will leave annual rates at seven percent, which he sees as a good start for the domestic economy. With regard to the latest statistical data, which showed a weakening month-on-month growth in consumer prices, keeping the base year rate at the same level is a good start for the economy, explained Kymlika.

However, in the nearest months, the anti-inflationary effect will be caused by the first out-of-year rate from last year. Unfortunately, this does not change the fact that the costs of the companies will increase and many of them will have to take drastic, questionable measures, including the dismissal of employees, if this is similar to five, he added.

From the company’s point of view, rate stability is positive at first. In the light of the current rates, the addition of annual rates would represent an additional cost of financing for companies. The speed of healthcare is now a problem for both consumers and companies. According to the current joint statement of SP R and NB for the 2nd quarter of 2022, businesses consider the rise in the prices of materials and raw materials and the price of energy to be the most significant barriers to their further development, according to Jaroslav Hank, president of the Union of Industry and Transport of the R.

Raiffeisenbank’s analytical team led by economist Helena Horsk estimates that the central bank will start cutting rates in the second half of the fifth year.

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