Czech Prime Minister Babis says interest rate hikes do no good


Acentral bank commentary in paragraph 12

PRAGUE, September 16 (Reuters)The Czech National Bank should refrain from raising interest rates that could hurt businesses and individuals due to higher borrowing costs, Prime Minister Andrej Babis said on Thursday, adding that inflation is expected to fall .

The Czech Republic, like most other countries, is grappling with rising inflation largely due to bottlenecks in global supply amid the coronavirus pandemic and rising costs of l ‘energy.

The effect in central Europe was compounded by low unemployment putting pressure on wages and strong consumer demand resulting from pandemic restrictions that eased ahead of the summer vacation months.

In June, rising inflation prompted the Czech and Hungarian central banks to become the first in the European Union to start raising interest rates.

The debate within the Czech central bank, which is independent and does not follow the instructions of politicians, has shifted to the speed at which rates should rise.

Asked in parliament during a question-and-answer session about what the government could do to prevent a sharp rise in prices, Babis said inflation was everywhere but the outlook pointed to a slowdown.

“We are not responsible for inflation. We are not fixing oil prices, it is not the government’s role to fight inflation, the central bank should do it,” Babis said.

“It would be nice if (the central bank) didn’t raise interest rates, because that wouldn’t help at all, it wouldn’t influence the market, it would only hurt people and businesses,” he said. he declared.

Babis has already commented on monetary policy.

In March, he said the bank should also keep interest rates low to aid economic recovery from the COVID-19 pandemic. The bank said at the time that it would decide interest rates according to “its own deliberations.”

OOn Thursday, the central bank reaffirmed its independence.

“The Czech National Bank is an independent institution, whose board of directors and its members, in accordance with the law, must neither seek nor accept instructions from anyone, including the president, parliament and government “Central bank spokeswoman Marketa Fiserova said.

The central bank has issued two 25 basis point rate hikes since June to bring its main repo rate down to two weeks CZCBIR = ECI at 0.75%.

Markets are betting there is a chance the central bank will opt for a steeper 50 basis point hike at its next meeting on September 30, which some policymakers say would be subject to debate with the acceleration of inflation.

Headline inflation jumped to over 4% in August, the first time since 2008, while data on producer prices on Thursday showed growth to a 28-year high.

The parliamentary elections in the Czech Republic are scheduled for October 8 and 9 and Babis’ ANO party leads the opinion polls.

(Reporting by Robert Muller and Jason Hovet; editing by Jonathan Oatis and Richard Chang)

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