Economist Marek: Rates in the Czech Republic should head down quickly this year, below four percent

Interest rates in the Czech Republic should head down quickly this year, according to a model example, they should get below four percent or close to three percent. David Marek, chief economist at Deloitte and adviser to the president, said this at today's expert debate organised as part of the Czech Elite, the most valuable Czech companies project.

The question of how fast and how drastically interest rates will go down concerns not only the Czech National Bank, but also the European Central Bank and the US Fed, he said. "But the Czech National Bank should be the most aggressive in cutting rates because the macroeconomic outlook here requires it," he said, referring to the stagnation of the domestic economy.

"There is a lot of uncertainty about how fast rates will go down," agreed Zdenek Tuma, former CNB governor and founder of IRQ Funds. This year will be all about finding economic balance, he said. The CNB's more cautious approach to rate cuts is related to its concerns about a more significant depreciation of the koruna, which could occur in this case, he noted.

Last Wednesday, the CNB's Bank Board cut the key interest rate by half a percentage point to 5.75 percent. The CNB started easing monetary policy last December, when it cut the key interest rate by a quarter percentage point to 6.75 percent in the first step. Before that, rates had been unchanged at seven per cent for a year and a half. In February this year, the CNB accelerated the rate cut, resorting to a half-percentage point drop.

Last week, CNB Governor Ales Michl would not predict what the new equilibrium level of the base rate would be. He said the bank's board is discussing it and should have its first detailed analysis in May. Michl only said in general terms that rates will be at a higher level than before the covid-19 pandemic.

Source: CTK