Nad inflací zatím nemáme vyhráno (Aleš Michl)

 

Rozhovor s Alešem Michlem, guvernérem ČNB
Peter Laca a Krystof Chamonikolas (Bloomberg 19. 6. 2024)

„Klíčové principy měnové politiky budou vyšší sazby, než na co jsme byli zvyklí v posledních deseti letech, a vyhýbat se uspěchaným a náhlým měnověpolitickým krokům a experimentům,“ uvedl guvernér Aleš Michl v rozhovoru pro agenturu Bloomberg.

Celý rozhovor v angličtině

When Aleš Michl became the governor of the Czech central bank, the country was in the throes of its worst cost of living crisis in three decades and he pledged to bring inflation under control within two years. Fast forward from 2022 and Michl has emerged as one of the first central bankers in Europe to deliver on the goal. But he isn’t ready to announce the mission accomplished.

“There is a certain degree of satisfaction, but of course it’s not a full victory yet,” the governor said in an interview on Tuesday, his first with international media since taking office.

“My work will be judged by long-term results and not only by inflation numbers this year.” The 46-year-old former commercial bank strategist has been in favor of “smoothing-out” the interest rate moves. That meant policymakers initially rejected more hikes implied by the bank’s own forecasts, and then started to cut rates later than the staff projections assumed.

The strategy appears to have worked, although Michl admits that luck may have played a part. Declining energy prices and improving global supply chains helped bring inflation toward the 2% goal in the first half of this year, from a peak of 18% in the fall of 2022.

With price growth running above the target for most of the past six to seven years, the governor said he would “consider it a success if inflation were rather just below than just above the target” for the remaining four years of his term.

The moment of vindication is of special significance for Michl, who first joined the Czech National Bank board in 2018 after serving as an external adviser to the prime minister.

As a co-founder of an algorithmic asset-management fund with a PhD in finance, the governor has had to work to overcome pressure early in his term after he halted a record series of rate hikes pursued by his predecessor.

Michl said he favored an approach that “sometimes less is more,” generally preferring to have rates higher for longer and avoiding “rushed, volatile, ad-hoc policy moves and experiments.”

“It’s better to have a more consistent but overall more restrictive policy,” he said. Policymakers have cut rates by half of a percentage point in each of the last three meetings with inflation moving inside the central bank’s tolerance range since the start of the year.

That brought the benchmark to 5.25%. The debate on June 27 will be whether to repeat a 50 basis point cut, or make a 25 basis- point reduction, according to Michl.

“For me personally, both of these scenarios are equally possible,” he said. “But no matter what we decide, we will still be above the neutral rate, and the monetary policy will remain restrictive in both alternatives.”

While the recent slowdown in core inflation is a positive development, it still remains high and the lack of further progress could be a reason for slowing or pausing the easing cycle, Michl said.

Investors have recently scaled down bets on the amount of rate cuts this year, partly due to a more hawkish outlook for the European Central Bank and the US Federal Reserve. Czech money-market prices now imply the benchmark rate at around 4% in December.

Michl said he considers long-term rates as key and wants to make sure that the three-year or five-year rates don’t fall. He doesn’t expect a significant impact on the longer end of the rate curve even if the board backed another half-point cut in the benchmark in June.

“Even if we cut by 50 basis points, we will still send a clear message that rates will be higher for longer,” he said. “The future decisions will then be based on incoming data, and we won’t have a problem to halt the easing cycle if we need to.”

Michl’s caution with rates corresponds to his views on fiscal policy. The central banker would like to see more progress in lowering the budget deficit as a way to help tame core inflation.

The ideal policy mix now would be the central bank’s “higher for longer” approach to rates, combined with the government running balanced budgets, according to the governor.

“Every deficit has an inflationary effect,” Michl said. “Having a zero deficit would be best possible option.” In general, his longer-term preference is to have an economy that relies on savings rather than credit, which is why he would be comfortable seeing slower growth and lower inflation than faster expansion combined with quicker price pressures.

“Our mandate is price and financial stability, and any potential negative consequences for economic growth are of secondary concern,” Michl said. “I’m convinced that long-term growth cannot be achieved through low interest rates, but through productivity and innovation.”