The Czech National Bank raised its policy rate by 25 basis points on Thursday, a decision backed by 4 of the 7 members of its board. Prime Minister Andrej Babis criticised the move publicly the following day.
Central bank defends the hike
Governor Ales Michl said the increase was meant to stop high energy costs from feeding into broader price pressures. He said it was also intended to anchor inflation expectations. The bank, he said, conducts an independent monetary policy and will not be influenced by criticism.
Babis calls the decision a scandal
In a social media video posted on Friday, Babis described the decision as an absolute scandal and said his government rejects it. He argued that the hike benefits commercial banks while making mortgage and corporate loans more expensive. Higher borrowing costs, he said, harm citizens and businesses alike.
Babis also questioned the logic of raising rates against rising energy prices. He said the central bank cannot influence global oil and gas prices. There was, he added, no reason to lift borrowing costs when Czech inflation was among the lowest in the EU.
A political backdrop to the dispute
Babis won last year’s election partly on a promise to make housing more affordable. He had repeatedly criticised interest rate levels before the latest move. The clash now puts monetary policy at the centre of a political argument over living costs.
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Source: Czech National Bank
