deficit falls as much as possible compared with the actual outcome of the previous year. it would be ideal for the fight against inflation if expenditure declined year on year compared with the actual outcome of the previous year ( to dampen demand ) and indirect taxes were not increased ( to avoid increasing inflation ). however, that is a political decision and it is not within my competence. in any case, we need our tightest monetary policy in twenty years to be accompanied by a credible budget consolidation plan, which the public will trust to support our efforts to reduce inflation. inflation is our responsibility. however, we are in this together with the government. we need support from fiscal policy and from you. reducing inflation is in the country's interest. we have already tamed several money flows in the economy. above all, reducing the country's debt is now needed for a long - lasting return of inflation to low levels. however, banks should also raise interest paid on all household deposits and motivate people to save even more. and this is what we should fight for together. for less debt and more savings. in the interest of the republic. references adam, t. and michl, a. ( 2022 ). inflace v r : cyklicky i acyklicky pibh? [ inflation in the czech republic : a cyclical or acyclical story? ] ( cnblog – official blog of the czech national bank ). adam, t. and michl, a. ( 2023 ). inflace klesa – prbzne vyhodnoceni dezinflaniho procesu v esku [ inflation is falling – an interim assessment of the disinflation process in the czech republic ] ( cnblog – official blog of the czech national bank ). bianchi, f. and melosi, l. ( 2022 ). inflation as a fiscal limit ( external link ). ( frb of chicago working paper no. 2022 - 37 ). 5 / 6 bis - central bankers'speeches cochrane, j. h. ( 2023 ). the fiscal theory of the price level. princeton university press. isbn : 9780691242248. frait, j. ( 2023, 17 march ). monetary macroeconomics and central banks in turbulent times [ lecture transcript ]. czech national bank. kunert, j. ( 2017 ). es

2017, i. e. there was an additional czk 1, 000 billion in the balance sheet, or an almost doubling of the balance sheet within four months of 2017. during these interventions, demand for czech government bonds from non - residents increased. this further expanded the country's borrowing options. budget constraints were eased. then, during covid, in particular at the end of march 2020, interest rates were reduced too close to zero. and fiscal policy was expansive for too long – we created a dangerous entitlement economy in which the state was the rich uncle who helped with almost everything. when an economy such as this one ( especially one with a huge surplus of money and incomplete price convergence ) was hit by a strong cost shock after the lockdowns, the czech republic ended up with the highest core inflation in the eu ( from november 2021 to october 2022 ). we address the causes of inflation in the czech republic in our blog article ( adam and michl, 2022 ). the central bank's large balance sheet can lead to changes in monetary policy transmission. this is also because when key interest rates are raised, monetary policymaking expenses increase. we pay interest to members of the czech banking association, i. e. commercial banks, for their excess liquidity deposits. to give you an idea, the cnb paid czk 15. 3 billion to the banks in interest on deposited liquidity in may 2023, which may amount to czk 185 billion for 2023 as a whole. this can lead to a change in the behaviour of banks, i. e. how and to whom they provide loans, by how much they raise deposit rates. in a system with excess liquidity, banks easily buy government bonds and government debt is monetised. an important lesson for me is that we will try not to repeat 2017 at the cnb and conduct monetary policy in a conventional manner. in his article, " less is more " for the imf's magazine, professor at the university of chicago and former governor of the reserve bank of india raghuram rajan said : " central banks have constrained their own policy space with asymmetric and unconventional policies, ostensibly intended to deal with the policy rate touching the lower bound. they have triggered a variety of imbalances that are making fighting inflation harder today. " more purposeful and less interventionist central banks would probably do better than a high - inflation, high - debt, low -