Czech Economy Needs Higher Rates

The Czech koruna’s slow appreciation is paving the way for policymakers to raise interest rates faster than forecast because the currency isn’t delivering the monetary tightening the economy needs, the central bank’s chief economist said, Bloomberg reported. Wage growth and the economy’s rapid expansion are outpacing the Czech National Bank’s outlook and eclipsing a slower advance in producer prices abroad, Tomas Holub said in an interview in Prague on Tuesday. His team is finalizing new projections for a Nov. 2 meeting that may provide a stronger argument for the seven-member policy board to tighten after they delivered Europe’s first rate hike in August and debated another increase last month. “Overall, we’re in a slightly more inflationary environment,” Holub said. “In a way, we are glad the overbought market is curbing koruna appreciation because it allows us to start normalizing interest rates more quickly. Our economy needs higher rates.”