The Czech National Bank (CNB) has three new board members. Last Friday, President Vaclav Klaus renamed Zdenek Tuma as the bank's Governor, and appointed the Managing Director of the Expandia Group and former PriceWaterhouseCoopers economist, Miroslav Singer, to the post of Vice-Governor. Pavel Rezabek, the former CEO of the Czech Consolidation Agency and Robert Holman, a professor of economics and long-time advisor to President Klaus, have also joined the central bank's board, which consists of seven members - the governor, two vice-governors, and four other senior officers. All are recommended by the government and serve six-year terms.
The central bank monitors and regulates interest rates in order to influence the level of economic activity in the economy. In recent years, one of the primary roles of the Czech National Bank has been to target inflation. We spoke to economist Jan Sykora of the Wood & Company brokerage about the old and new governing boards:
"I think the old board was a very professional board and I don't think it has done anything that could be deemed as wrong or questionable. One thing that could raise some eyebrows is that the board may have been a little bit too cautious about inflation expectations. The recent rate cut could be some sort of proof that the board has over-estimated their inflationary expectations, which haven't materialised, and the board has reacted with the rate cuts. So, I can only say that these rate cuts should have come a little sooner or the rate hikes should not have happened. At the end of the day, the higher cost of money was a cost to the economy."
What about Zdenek Tuma's renaming as governor?
"Mr Tuma is a well-respected professional and I think that the past board has done a pretty good job and from that perspective I think it was only sensible that he was renamed Governor."
"I think it's a very positive rejuvenation of the board. It has people from the business sector, with the hands-on business experience in the private sector. So, I think all of that is quite positive for the future decision-making process on the introduction of the euro, which will be influencing the Czech business community and the business climate.
"Looking at the new members, there are Mr Rezabek, Mr Singer, and Mr Holman. Mr Singer has experience in the private sector, Mr Rezabek who was at the Consolidation Agency has experience in both the public and private sector, and lastly Mr Holman, who is a well-respected academic, represents the academia. If you look at the people who were already on the board, there are Mrs Erbenova, Mr Niedermayer, and Mr Tuma. They all provide a pretty good mix."
You've already mentioned the adoption of the euro, but what do you think will be the bank's biggest task in the future and do you think that its policy is going to change now?
"I would certainly hope that the board will be a little less cautious and, should it see that there are no strong inflationary pressures, keep the interest rates as low as possible. I also hope it helps to support economic growth. However one can argue that the CNB's role is somewhat limited and what drives this economy is the underlying economic factors as such, and to a certain extent the government's lack of policies and reforms that could certainly help the growth to accelerate."
Should the CNB be more influential when it comes to factors like the national debt, unemployment, or the various reforms such as pension and social reform?
"The central bankers have in general been rather guarded with their statements and their words and I think that's the nature of any central banker in the world. I think the CNB has stated its views on the reforms or lack of reforms and the fiscal discipline of the government etc. So, I think the bank could be a little bit more vocal in its opinions. But at the end of the day, the only think it can day is to raise its concerns and it's up to the government to act."
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