More accurately, what is needed for the koruna to start following an appreciation trend again, like it did before 2008? You can view this as a mathematical equation with three variables. x + y + z = strong koruna I define these three variables as monetary policy, fiscal policy and long-term growth policy. To achieve the result, all three variables, the three policies, x + y + z, must act together, in concert and at the same time. It's not enough to have just one of them. First policy for a strong koruna – monetary policy Monetary policy affects economic activity with a lag of more than a year. This lag complicates the decision-making and communication of inflation-targeting central banks. Let's assume there is no lag in transmission. In that case, it would be enough to stop raising rates as soon as core inflation stabilises, or even better, when it starts falling. However, it's different in reality. Because of the transmission lag, the central bank should correctly stop raising rates before inflation peaks.3 The problem of this  1/4  BIS - Central bankers' speeches  academically and practically correct approach is that people can see that inflation is still high and might think that the central bank is not determined to fight inflation because rates have stopped rising. The economically incorrect approach of raising rates until cost-push inflation turns around leads to an overshooting. The resulting recession will be deeper than necessary.
cnb.cz/cs/verejnost/servis-pro-media/autorske-clanky-rozhovory-s-predstaviteli-cnb /Klausova-draha-permanentka/ 3 https://www.cnb.cz/cs/o_cnb/cnblog/Inflace-v-CR-cyklicky-ci-acyklicky-pribeh/ 4 https://www.cnb.cz/cs/verejnost/servis-pro-media/autorske-clanky-rozhovory-s-  predstaviteli-cnb/Krotitele-nakladove-inflace/ 5 For details, see https://www.cnb.cz/cs/o_cnb/cnblog/Jak-dlouhy-je-spravny-horizont-  menove-politiky/. 3/4  BIS - Central bankers' speeches  6 https://www.cnb.cz/cs/verejnost/servis-pro-media/autorske-clanky-rozhovory-s-  predstaviteli-cnb/Zapisky-z-Jackson-Hole-1-00001.-dil/ 7 https://www.cnb.cz/cs/verejnost/servis-pro-media/autorske-clanky-rozhovory-s-  predstaviteli-cnb/Jdeme-prikladem-brzdime-platy-v-CNB/  4/4  BIS - Central bankers' speeches