For central banks, less can mean more. Therefore, our strategy in the Czech Republic is "higher for longer", i.e. to maintain interest rates at higher levels for longer. Regarding government debt, I stated that monetary policy is at its tightest in 20 years and is slowing the economy. A problem arises if the government helps the economy with subsidies, supports and contributions at the same time. This counters our fight against inflation and the economy is not dampened as much as it should be. Therefore, the CNB must consider the following: Should we start competing with the government and dampen the economy by, for example, increasing rates? Should we further push down demand, just to have it subsequently fostered by the government with some kind of supports or subsidies? And so on ... it is a vicious circle. It would be better if both policies were anti-inflationary at the same time. Cochrane (2003) describes these  4/6  BIS - Central bankers' speeches  considerations, as does the excellent article on the subject presented by Bianchi and Melosi (2022) at the conference in Jackson Hole last year. To add to that, everything is complicated further by the first problem described above, i. e. the CNB's large balance sheet, or the huge liquidity of the banking sector.
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.