On Thursday, the Czech National Bank raised its benchmark rate to 4%, a quarter-point move pushed through by a slim 4 to 3 majority. It marked the second hike this year, following a similar step in June.
Governor Ales Michl said the aim is to stop higher energy costs from seeping into broader price gains and to keep inflation expectations anchored. With price stability as its sole mandate, the bank has flagged core inflation - stripping out volatile categories such as food and energy - as a concern because it already sits above the 3% ceiling of the bank's tolerance range.
Billionaire premier Andrej Babis ramped up his criticism in a social media video Friday, arguing the increase will lift mortgage and corporate borrowing costs while helping commercial banks. "The decision is absolutely scandalous," he said.
"We reject this. It harms our people, our fellow citizens, and our businesses. This policy runs counter to the interests of us all." After a platform that included cheaper housing helped him win last year's election, he has kept up attacks on elevated rates, arguing there is no justification for increasing borrowing costs given that Czech inflation ranks near the bottom in the European Union.
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He has also questioned using rate hikes to address energy-driven pressures, noting the central bank cannot influence global oil and gas prices. Michl has repeatedly said the bank sets policy independently and will not be swayed by critics.
In plain English: despite the narrow vote, policymakers delivered another increase, saying they want to block rising energy bills from spilling over into broader inflation and to firmly moor inflation expectations, amid concern about core inflation.
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