For the time being, there is no point speculating on when interest rates will be cut. On the contrary, as you know from the voting we published, some Bank Board members are still thinking about raising rates further – our monetary policy meeting is next Wednesday. A strong koruna played an important role in the turnaround in inflation. We adjusted the monetary policy strategy in July 2022. We stabilised interest rates and verbally supported a strong koruna. In a speech at Masaryk University in November 2022, I presented the conditions under which our koruna would be strong again (Michl, 2022). Although we did not raise the CNB's repo rate further to more than 7%, we managed to have a record-strong currency. The average monthly exchange rate of the koruna to the euro was the strongest ever in April 2023, reaching CZK 23.44 to the euro (for comparison, it was CZK 23.55 to the euro in July 2008). I will always be proud if we have a strong koruna during my mandate. In 2023 Q1, the strongest-ever koruna together with the highest interest rates since 1999 created the tightest monetary conditions in more than twenty years (a more detailed analysis is available in our blog post published on the CNB website, see Adam and Michl, 2023). The strong exchange rate made imports cheaper and tightened monetary conditions also for exporters. The large ones in particular had not been influenced by our monetary policy too much until then, since they were taking out loans in euros.
However, that is a political decision and it is not within my competence. In any case, we need our tightest monetary policy in twenty years to be accompanied by a credible budget consolidation plan, which the public will trust to support our efforts to reduce inflation. Inflation is our responsibility. However, we are in this together with the government. We need support from fiscal policy and from you. Reducing inflation is in the country's interest. We have already tamed several money flows in the economy. Above all, reducing the country's debt is now needed for a long-lasting return of inflation to low levels. However, banks should also raise interest paid on all household deposits and motivate people to save even more. And this is what we should fight for together. For less debt and more savings. In the interest of the republic. References Adam, T. and Michl, A. (2022). Inflace v R:cyklický i acyklický píbh? [Inflation in the Czech Republic: A cyclical or acyclical story?] (cnBlog – official blog of the Czech National Bank). Adam, T. and Michl, A. (2023). Inflace klesá – prbžné vyhodnocení dezinflaního procesu v esku [Inflation is falling – an interim assessment of the disinflation process in the Czech Republic] (cnBlog – official blog of the Czech National Bank). Bianchi, F. and Melosi, L. (2022). Inflation as a Fiscal Limit (external link). (FRB of Chicago Working Paper No. 2022-37). 5/6  BIS - Central bankers' speeches  Cochrane, J. H. (2023). The Fiscal Theory of the Price Level. Princeton University Press.