Given the recent fall on world stock markets, some Czech analysts are warning that the country’s central bank (CNB) is in a tricky situation. At its most recent meeting, the bank’s council made the surprising decision to raise its basic interest rates. Since then, however, fears have grown that the current health scare could push the Czech economy into slower growth even as prices continue to rise on essential consumer goods as well as homes and home furnishings. BHS’s chief economist Štěpán Křeček writes in kurzy.cz that this is a recipe for stagflation. If inflation continues but the economy slows, Czechs would end up with a lower standard of living, he warns.
But the governor of the Czech National Bank Jiří Rusnok told the daily E15 that the country’s fundamentals are strong and that any panic was ridiculous. “It would be hard to find a country in Europe that from a macroeconomic point of view is better prepared than us,” he said. “It’s fine, there’s a budgetary buffer for solving crises. We have a floating exchange rate with the bank which has one of the largest reserves in the world….We also have room to maneuver with the rates which almost nobody has. So let’s not get hysterical,” he said.
