On Friday, President Vaclav Havel appointed Zdeněk Tůma as the new governor of the Czech National Bank (CNB). Luděk Niedermayer, a CNB board member, succeeds Tůma as a new vice-governor. President Havel also decided to replace two outgoing board members with Michaela Erbenová and Jan Frait. Both of the "promoted" board members — Zdeněk Tůma and Luděk Niedermayer — have been the most outspoken board members and are considered as inflation hawks. The two new members have excellent academic credentials but it remains to be seen how they will cope with day-to-day monetary policy conduct.
We do not expect dramatic changes in the CNB's monetary policy, as the new governor and both vice-governors (Nidermayer and Oldřich Dědek) have been board members for some time and have all shaped monetary to now. The new members do not seem to diverge from the outgoing members in their views on monetary policy. However, the new make-up of the bank board is decisively younger and less marked by the central bank’s past interaction with politics. The new board looks politically independent and perhaps more assertive toward politicians. Patria forecasts up to a 100 bps increase next year in the official 2-week repo rate, that from the current 5.25%.
Zdeněk Tůma (40) has been a vice-governor of the ČNB since February 1999. Prior to that he was a director of the EBRD in London. Until mid-1998 he was the Chief Economist at Patria Finance and Professor of Economics at Charles University in Prague. He is widely respected on financial markets and was considered as the most influential board member apart from the former Governor Tošovský. His priority will probably be the stabilization of low inflation environment. The perception of Mr. Tuma as the more hawkish of the two leading candidates for the governorship resulted in a surprisingly strong negative response to his appointment last week from the ruling Social Democrats and from the largest opposition party, the ODS.