Final Word from Tuesday, February 15, 2022

On Nov. 7, 2013, with its benchmark interest rate at 0.05%, the CNB devalued the crown as a way to get households and businesses to spend more money. Gov. Miroslav Singer warned of a deflationary price spiral similar to the Great Depression. Between late-2013 and 2017 the CNB pumped the equivalent of about two state budgets into the economy to keep the crown weak, and households responded by increasing their borrowing over those four years by Kč 316.5bn (25%), to Kč 1.60 trillion. Now it's Kč 2.11 trillion. The CNB has since raised its benchmark interest rate by 8,900%, from 0.05% to 4.50%. Vojtěch Benda and Jakub Matějů of the CNB defended the rate hikes in Právo today and said that the CNB will do all it can to make sure Czech households don't turn out like the peasants at Chlumec whose uprising in 1775 against higher prices and famine was put down by Hapsburg soldiers. Households that were lured by the CNB into an interest-rate trap now have a historical example to study. [ Czech Republic Czech National Bank board adviser devaluation intervention governor ]

Glossary of difficult words

uprising - an act of resistance or rebellion; a revolt;

benchmark - a standard or point of reference against which things may be compared;

famine - extreme scarcity of food;

to put down - to suppress;

to lure - to tempt (a person or animal) to do something or to go somewhere, esp. by offering some form of reward.

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