ales michl : the current level of inflation still makes it impossible to lower interest rates speech by mr ales michl, governor of the czech national bank, during the discussion of the " financial market supervision report for 2022 " in the senate of the czech republic, prague, 27 july 2023. * * * president, esteemed senators, good afternoon, i am honoured to be here with you today. one year ago, in july 2022, the new cnb bank board took over responsibility for the monetary policy and financial stability of our country. the situation at the time was as follows : first, we had the highest inflation in history, leaving aside the price growth that occurred during the country's economic transition in the early nineties. second, during the liquidation of sberbank, lawsuits were brought challenging the liquidation process. these lawsuits were brought both by representatives of private firms and by representatives of regions, cities and municipalities. helping to ensure the transparency of the process of liquidating sberbank was important for us in terms of financial stability and credibility. and third, we took up the reins of the cnb at a time when it had posted its largest loss and the worst financial results in its history. we have started to deal with all of these problems. let's first look at how we reduced inflation : we opted for a strategy of keeping interest rates unchanged at 7 %. interest rates were at their highest level in more than 20 years and were already sufficiently dampening economic activity. key to our strategy was that we supplemented it with a strong koruna policy. the koruna was at its strongest level ever in spring of this year if you take the monthly average for april 2023. the stabilisation of interest rates together with the strong koruna meant we had the tightest monetary conditions in 25 years. i am therefore now able to communicate to you the results of our work so far : inflation has started to come down gradually from 18 % in september. inflation is now already just below 10 %. but it is still not at a level we would be happy with. inflation is still high. it is at a level which still makes it impossible to lower interest rates. this level of inflation requires us to adopt a hawkish policy stance. it is necessary to ensure that inflation does not remain persistent and decreases further. as regards the second problem, it was important for financial stability for us to become active members of the creditors'committee in the process of liquid

republic of bulgaria for euro area membership, headed by the finance minister and me. each of the bnb deputy governors is in charge of the relevant area of activity within the bnb's mandate. contact groups have been formed, with individually named members of the bnb and of the european central bank working on specific matters. the absence of a regular government and a clear political commitment to the euro area accession process are a serious obstacle to its progress. this is the reason why we are missing, one by one, important indicative time - frames. this time last year croatia was well ahead on its way to the euro area. i will give you only one example. on 10 september 2021 the european commission and the euro area member states signed a memorandum of understanding with croatia on the production of national euro coins. this memorandum sets out the actions required for a future euro area member state to begin producing euro coins. the signing of the memorandum makes it possible to detail the schedule for the future euro coins of the country, allowing that country to start selecting its euro coin national side designs and to carry out the technical preparations for minting and producing a test series of national euro coins. the memorandum is a precondition for that country to receive the technical specifications documentation needed for production of national euro coins. we are about a month and a half behind schedule only on this issue. the consultations that the minister of finance and i had last week show that the signing of such a memorandum is still possible but this will urgently require at least two things : firm political support and a clear mandate of the central bank governor. the political decision on this issue comes with a price. over the last months, and especially the last weeks, markets have been giving us very clear and warning signals. the price of bulgaria's newly issued debt has been rising at an unprecedentedly high rate. this implies an enormous additional financial weight in the medium term, which 3 / 5 bis - central bankers'speeches more acutely than before poses the question about the terms of funding bulgaria's budget and economy. what is the connection with the topic under discussion? the connection is direct. if you read credit rating agencies'announcements, you will see that the key factor for bulgaria to get a rating upgrade, i. e. for improved terms of its funding, is the successful implementation of the euro area accession process. as a reference point, after the decision on croatia's accession was made, two credit rating agencies upgraded its credit rating by