We attribute a greater role to credit in the economy and debt, which our model previously left out. Deputy Governor Eva Zamrazilová also spoke about this at the University of Economics and Business. Deputy Governor Jan Frait also discussed this topic in his lecture at the university in Ostrava in  2/6  BIS - Central bankers' speeches  2023. Credit market developments very well combine our two main objectives – price and financial stability. Because of the transmission lag, the central bank should correctly stop raising rates before inflation peaks. The problem of this 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. So, I try to explain over and over again that the CNB's interest rates are already at a level that is dampening economic activity. We have the tightest monetary policy in more than twenty years and we want it to remain so for some time. The current data from money flow monitoring are as follows: The volume of new mortgages fell by 64% year on year in January–April 2023. New koruna loans to firms fell by 54% year on year in the same period. However, firms are fleeing to the euro – 47% of new loans to firms are currently in euros. Nevertheless, this channel is also gradually cooling as the ECB raises its rates. The volume of new euro loans to firms fell by 16% in January–April.
For example, it means that you, the banks, should now raise interest rates on all household deposits, even short-term ones, and share a somewhat larger proportion of your profits with your clients (Michl, 2019a). Let's base our economy on savings, not on debt. A month ago I made a speech at the University of Economics and Business in Prague (Michl, 2023). I would like to follow up on the speech here, recap its main ideas and expand on them in the context of new data on the economy. I started the speech at the University of Economics and Business by saying that I had good news for the public: inflation is finally falling. This is being confirmed. Annual headline inflation peaked in September last year, when it reached 18%. We managed to stop it. In line with our expectations, a gradual downward trend in inflation started in February this year. Inflation fell to 16.7% in February and then to 15%. In April, it stood at 12.7%. The inflation figure for May (11.1%) was published on Monday this week. It should fall to below 10% in annual terms within two months. This is not a victory. In the second half of the year, inflation will still be at a level we must not put up with. We must not get used to it. We must not adapt to it. Interest rates will therefore remain high  1/6  BIS - Central bankers' speeches  for longer.