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12 I Companies & Markets bne December 2021
check if it allows the CJEU to impose financial penalties for failure to comply with interim measures.
The question to the tribunal also covers another article of the treaty, one which the CJEU used in considering the Turow case, which refers to the “functioning of constitutional bodies of the Republic of Poland”.
The move by the chief prosecutor is yet another development in Poland’s legal tug-of-war with the EU that has seen Warsaw ignore a number of CJEU’s rulings regarding the
Czech central bank unleashes highest rate hike since 1997 to fight surging inflation
bne IntelliNews
Czech central bankers increased the two-week repo rate above analysts´ expectations on November 4, hiking it by 125 basis points to 1.75%, the highest rate hike in the past 24 years, to fight surging inflation, which saw the highest growth in the past 13 years to 4.9% in September.
At the same time, the CNB increased the discount rate to 1.75% and the Lombard rate to 3.75%.
“The rise in rates will limit the pass-through of these pressures into prices in the longer term, ensuring the return of inflation towards the 2% target at the monetary policy horizon. The Czech National Bank’s response will also help anchor inflation expectations at its target,” stated the Czech National Bank (CNB) report.
"A number of institutions and entrepreneurs were expecting a rise of between 50 and 100 basis points. The 125-point rate hike is another strong and loud signal from the CNB board that it is taking rising inflation and the confluence of several inflationary pressures seriously," said Pavel Peterka, chief economist at Roklen Group, as quoted by news website Novinky.cz.
"If the sharp 0.75 percentage point increase at the last [CNB] meeting was something of a surprise, the current move is
a major surprise. It is clear that the CNB is fully aware of its mission to maintain reasonable price growth and has therefore decided to take this fundamental step," commented Petr Kriz, a partner at PwC, for the Czech News Agency.
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Polish government’s judicial reforms. The EU insists that the reforms undermine Polish courts’ independence and impartiality, therefore tearing a hole in the uniformity of the EU's legal framework, harming Poles and foreign investors.
That also led to the CJEU issuing another fine. In late October, the CJEU fined Poland €1mn a day for not dismantling the disciplinary chamber of the Supreme Court. Poland keeps refusing to pay the fine, which will therefore be automatically deducted from EU transfers to Poland.
Inflation saw the highest growth in the past 13 years to 4.9% in September.
“CNB shocked everyone with a 125bp interest rate hike at today’s meeting and while this was clearly intended
to front-load tightening, the hawkish communications suggest that the tightening cycle still has some way to go,” commented Liam Peach, an economist from Capital Economics. “We had highlighted for some time that investors were underappreciating the hawkish bias at the CNB and flagged the risk that policymakers would raise interest rates aggressively to take the heat out of the economy,” Peach added.
The massive “increase in the key interest rate means that the [CNB] board perceives significant inflation risks and the need for a strong monetary policy response to prevent medium- term inflation expectations from rising. The CNB's next steps in interest rates will depend on developments in the economy in terms of inflation and economic growth, and it will also be important whether and how significantly the Czech koruna appreciates," said Radomir Jac, chief economist at Generali Investments CEE.
As BHS chief economist Stepan Krecek put it, even the astronomical increase in interest rates will not be able to avert the price increases that are ahead by the end of this year. “However, it gives us hope that price growth will slow down next year," Krecek said.
Jakub Seidler, chief economist at the Czech Banking Association, also warned that the rate hikes will be slow in curbing inflation. According to him, the impact of these