PRAGUE, May 3 (Reuters) - The Czech National Bank has
responsibility for bringing decades-high inflation under control
and should refrain from blaming the government for its budget
spending, Prime Minister Petr Fiala was quoted as saying on
Wednesday.
Fiala's comments came after the central bank came close to
raising interest rates further after it had paused a sharp
tightening cycle in mid-2022, after Governor Ales Michl took the
helm of the bank's board.
Michl said on Wednesday - after the bank board voted by a
narrow 4-3 to keep the key policy rate at 7.00% and surprised
markets with growing backing for a hike - that fiscal policy was
a main concern and pushing up inflation risks.
It followed data on Tuesday showing the state budget deficit
doubled year-on-year between January and April.
The independent central bank has in the past refrained from
clashes with governments over policy.
Fiala, in an interview with broadcaster CNN Prima News cited
by CTK news agency, said the two needed to work together.
"But if the governor is calling on the government to act,
then I say it is acting, and I would ask if the central bank is
acting enough," Fiala said.
The government's five coalition parties are seeking this
month to agree budget cuts and increased tax revenue worth tens
of billions of crowns to reduce next year's deficit. It targets
a 2023 deficit of 295 billion crowns ($13.87 billion), down
from a record deficit above 400 billion in 2021.
Michl said on Wednesday that "if no long-term credible
consolidation package is announced, then it will simply create
pro-inflationary pressures in the future and we will probably
have to raise interest rates."
The bank's key rate is at a more than two-decade high now,
while inflation was at 15.0% in March. The economy is climbing
out of a mild recession, and with a tight labour market, wage
growth is picking up.
Markets had not priced in chances of a hike before Wednesday
and have mainly focussed on the timing of rate cuts this year.
($1 = 21.2690 Czech crowns)
(Reporting by Jason Hovet; editing by Jonathan Oatis)
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