Aleš Michl: Forever hawkish
Guest lecture by Mr Aleš Michl, Governor of the Czech National Bank, at the MIT Sloan School of Management, Cambridge, MA, 30 April 2026.
I became Governor of the Czech National Bank in July 2022. At that time, inflation stood at 17.5%. Two months later, it peaked at 18%. This was the highest inflation rate in the history of the Czech Republic, with the exception of the price liberalization after the Velvet Revolution in the early 1990s.
In February 2024, the annual inflation rate reached 2% – precisely our target. We were one of the first central banks in Europe to achieve the target.
Since then, inflation has been close to the target, averaging 2.4% in 2024 and 2.5% in 2025.
Chart 1 shows data from the Czech Republic, starting in 2010 and ending when I became Governor.
When I was appointed, the CNB's key interest rate stood at 7% – a very high level. In the ten years before the Covid pandemic, the average interest rate had been just 0.6%. When inflation started to accelerate in the Czech Republic, the CNB switched from extremely low to very high interest rates. Yet even with a key rate of 7%, it was not able to bring inflation down quickly.
The Bank Board in our country consists of seven members, including the Governor. The Board was almost completely replaced by the President within a short period of time because the terms of office of the previous members had expired (denoted as "change in CNB leadership" in the chart). We formed a new team. In my very first speech when I was appointed, I promised the public that we would bring inflation down from 18% to the inflation target of 2% within two years (Michl, 2022a).