(Bloomberg) -- Czech central bank chief Ales Michl called on the government to balance its budget to help prevent any future inflation resurgence.
Policymakers in Prague want to maintain a hawkish monetary stance to curb borrowing by households, companies and the state, Michl said in an interview with CNN Prima News channel on Sunday. Last month they paused interest-rate cuts in order to assess fresh data and the economic outlook, and will decide on further steps at the next meeting in February, he added.
With inflation running slightly above the Czech National bank’s 2% target, its governor is doubling down on his preference for restrictive monetary and fiscal conditions despite anemic economic growth. The government of Prime Minister Petr Fiala has adopted one of the most aggressive austerity programs in Europe, but has not completely eliminated the budget shortfall because of elevated spending on defense and infrastructure.
According to Michl, the fiscal gap is a source of persistent price pressure, along with rising costs of services and a nascent recovery in the housing market.
“The biggest inflationary risks are the state budget deficit and excessive amount of money in circulation,” he said. “We are in no crisis, so we need to have a balanced budget. That’s the best way to fight inflation.”
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