The Prague Post Online: Business: ČNB adds board member

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ČNB adds board member

Possible departure of bank's governor shifts focus to deputies

By Michael Heitmann
Staff Writer, The Prague Post
February 27th, 2008 issue

Eva Zamrazilová, the newest member of the Czech National Bank’s (ČNB) governing board, is described by analysts as middle-of-the-road in economic policy, neither a hawk nor dove when it comes to cutting or raising interest rates, the bank’s primary tool for steering the economy.

President Václav Klaus appointed Zamrazilová, 46, to the bank board Feb. 22, replacing outgoing Vice Governor Luděk Niedermayer, 41, who reached the bank’s limit of two six-year terms. Zamrazilová has most recently worked as a macroeconomic analyst at Komerční banka.

Succeeding Niedermayer as vice governor will be one of the ČNB’s existing directors, Mojmír Hampl, the president’s office announced.

Following on the heels of this reshuffling of the bank’s leadership, the government nominated the ČNB’s governor, Zdeněk Tůma, to lead the European Bank of Reconstruction and Development (EBRD) Feb. 25.

Tůma’s nomination will be discussed by European Union finance ministers in March. If selected, Tůma would leave the bank, which he has led since 2000. His possible departure increases the focus on the policy standards held by the ČNB’s other board members, including Zamrazilová.

Zamrazilová most recently criticized Slovenia for joining the eurozone too early during a discussion at the Center for Economics and Policy (CEP) Feb. 18, which Klaus attended.

Concerning euro approval, there is no doubt the bank’s leadership is plotting a careful path toward adoption, said Marek Hatlapatka, head of research at the Cyrrus brokerage.

The ČNB is primarily a guardian against inflation, and euro adoption will create major inflationary pressures. In addition, the ČNB will lose some of its grip on the economy following the euro’s introduction, Hatlapatka said.

It’s a cliché, though, that a majority of the bank’s board members are determined euro skeptics, said Raiffeisenbank analyst Aleš Michl.

“I consider them euro realists. The adoption process cannot be hastened,” he said.

The bank will try to improve the labor market and aim for a balanced budget. “Only then can we talk about the euro. I’d sign on to that sort of approach,” Michl said.

The labor market’s inflationary pressures will be on top of Zamrazilová’s agenda, Michl added. If labor tightens further and wages rise, Zamrazilová will eventually vote for raising interest rates, he said.

Looking at Zamrazilová’s publications, there is an emphasis on the fight against inflation, Hatlapatka said. “If I had to bet on it, I’d say she’s more of a hawk than a dove,” he added.

Overall, the ČNB’s power is diminishing. Michl estimates that the bank can influence about one-third to one-half of the country’s inflation.

Michael Heitmann can be reached at mheitmann@praguepost.com

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