00:00This is a big week because the ECB yesterday raised interest rates.
00:04What kind of impact does that have on your country?
00:08So good morning, Francine, and thank you very much for having me.
00:11So our next decision, which will be next week, will be based on our own risk assessment.
00:19So the ECB decision will not affect our next step.
00:23Our key rate has been 3.50, 3.50 for more than a year.
00:30So we have not cut rates below inflation in this cycle, which is very important.
00:36So for us, oil is not the problem.
00:39The real problem is that there is too much money in the economy.
00:45It was created by years of zero rates and negative real rates before COVID.
00:53And it was supported by fiscal deficits.
00:57So this is still pushing core inflation higher.
01:02So we have to stay hawkish forever.
01:05So talk to me a little bit about we just, you know, we're trying to analyze what's happening in the
01:09Middle East.
01:10And frankly, it's unclear because every couple of days there's negotiations.
01:14We're not sure where it ends.
01:15Sometimes it changes.
01:16How much real inflationary pressure do you see from the price of oil?
01:21Well, so what was tend to increase inflation definitely.
01:26So they bring more spending, bigger deficits and more pressures on prices.
01:34Is that, I mean, could that be short-lived?
01:36Again, there's many questions on whether if Iran gets resolved, which, you know, we don't know at this point.
01:43But if it gets resolved quite quickly, does it, you know, does inflation, does it really help with inflation on
01:48the short side?
01:50With the cost inflation, yes.
01:53But when I became governor of the Czech National Bank, it was in mid-2022.
02:01The inflation was close to 20%, 20%.
02:06So we reduce it to around 2%.
02:09And for more than two years from now, inflation has been close to our target.
02:16So we restore price stability and we will protect it.
02:20But current inflation right now in the Czech Republic is 2.1 year on year.
02:30The rates 3.5, yeah, so which is our big advantage.
02:36So our policy is already tight, but we have to decide or right now it's about to decide whether to
02:47switch to a tight policy.
02:50And current inflation is 2.9%.
02:54And we are fighting with this current inflation.
02:57But so, Governor, are you ready to support a rates increase as soon as next week when you meet?
03:07I think a June move is now a real possibility.
03:11The case for a rate hike has strengthened and forever hawkish, I would say.
03:22Governor, I mean, one of the other things I want to talk about was Bitcoin.
03:25Because in November 2025, of course, the Tech National Bank made its first ever purchase of crypto assets, mainly Bitcoin.
03:32What have you learned so far from running this test fund?
03:38So Central Bank and Bitcoin, it's a strange combination, isn't it?
03:42Yeah. So most people do not put these two things together.
03:48I do.
03:49So my logic or my philosophy is that in monetary policy, Central Bank must be conservative.
03:56For me, that means hawkish forever, higher rates for longer, no quantitative using, no currency devaluation.
04:05That's conservative monetary policy.
04:07But Central Bank must also think ahead.
04:10And in operation, we must innovate, we must try to understand the future.
04:16That's why we created a test portfolio.
04:21Yeah.
04:22It's a test portfolio, not a revolution, not a political statement, a test.
04:27It's a $1 million test.
04:29Our exchange, our FX reserves are $180 billion of US dollars.
04:34So we will run this test for two years and experience, as you ask, I see only two possible outcomes
04:43for Bitcoin, very high value or zero.
04:47Yes.
04:47But, I mean, is this a surprise?
04:49Do you think that you're holding?
04:51I understand it's a test and it's only for two years.
04:53But what portion of the reserve could you imagine holding in Bitcoin in the future?
05:01We will decide it after the test, after two years.
05:04Right now, I would like to say that I'm not a crypto governor, definitely, because I expect a hard shakeout
05:12in crypto, definitely.
05:14There may be a wave of failures.
05:17But on the other hand, there will be strong companies and strong technologies which survive, definitely.
05:25So there will be some process of creative destruction in this part of economy.
05:31But let's understand the future.
05:33Let's create the future.
05:34I'm there for the future.
05:36Governor, you are quite innovative.
05:38I mean, what you've done is very innovative also on the change in reserve management.
05:43It is a shift to basically increase a portion of equities and gold.
05:47Yes.
05:48And that's happened.
05:49What results is this new approach delivering?
05:52So our investment horizon is infinite.
05:56Okay.
05:57So that's that's we that's why we provide two long term moves, increase equity allocation from eight to 26 percent
06:07of our ethics reserve.
06:08And we increase our gold from almost zero to 6.5 percent, I would say, of our reserves.
06:15And results last year return was 10 percent, same as Warren Buffett's result.
06:23So, so far, so good, I would say.
06:24But one year is not enough, I would say, to judge a portfolio.
06:28Warren Buffett built his reputation, I would say, over more than 50 years.
06:34So ask me again in 50 years.
06:36Yeah.
06:36I mean, I hope to ask you next year.
06:37I hope this is not in 50 years, but the portion of stocks, as I understand it, will also increase
06:43to about 30 percent of the total reserves by 2029.
06:47And a lot of that chunk chunk is U.S. stock market.
06:51So what what is, I guess, your strategy for U.S. equities, especially at a time where everything is changing
06:57because of SpaceX today?
06:58So with the investment horizon, which is infinite, so we do not focus on short-term bubbles.
07:08So we stay with our strategy.
07:10So we have built the portfolio for the long-term future.
07:13We have a high expected return because of the stocks and because of the U.S. stocks.
07:20So the portfolio is for maybe for the next 50 years.
07:26So so that's it.
07:27I mean, do you worry about valuations in A.I. and tech in the U.S.?
07:32No, I'm not focusing on short-term bubbles.
07:35Right now, it's a long-term portfolio for our kids.
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