2023-05-03 22:21:00
Prime Minister Petr Fiala (ODS) questioned the words of the governor of the Czech National Bank, Aleš Michl, about the pro-inflationary effect of state budget deficits. The CNB is primarily responsible for inflation, its governor should not blame the government, the prime minister said today in an interview with CNN Prima News. He suggested that the central bank could do more against inflation.
Michl mentioned the state budget deficit, which reached 200 billion crowns at the end of April, in his statement today about the possible further development of interest rates. According to Michl, if the government’s package to consolidate public finances is not credible enough, the CNB will have to fight against the pro-inflationary impulse created by state budget deficits. “If a credible consolidation package is not created and there is no visible effort towards responsible budgets, the CNB will be forced to raise interest rates,said the governor.
Consumer prices in the Czech Republic rose by 15 percent year-on-year in March, and inflation has remained at similar and higher levels for almost a year. According to Fiala, reducing inflation faster is primarily the task of the CNB. There is no need to blame each other, the government and the central bank should work together, said the Prime Minister. According to him, it is not up to the government to comment on the actions of the central bank. “But if the governor calls on the government to act, then I say that it is acting, and I ask if the CNB is also acting sufficiently,” he added.
The government wants to present the consolidation package that Michl talked about in mid-May. It should reduce the structural deficit by about a percentage of the gross domestic product, i.e. by roughly 70 billion crowns. Last year, this deficit was 2.6 percent of GDP. However, according to some economists and politicians, the recovery of public finances should be faster.
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