Membership in the eurozone does not necessarily guarantee protection against inflation. Central banks responded very differently in reaction to the recent inflation crisis. Had the Czech Republic been part of the eurozone in 2022–2023, it would have been subject to the ECB’s single monetary policy—one based on the average inflation of all member states rather than on member states’ domestic conditions. Lower interest rates would have likely prolonged price increases during an already high-inflation period.

Key takeawys:

• Within a single year, the CNB raised its key interest rate nine times, from 0.25% to 7.00%.
• By mid-2022, the CNB was already maintaining this 7.00% rate, while the ECB’s main rate remained at zero.
• The CNB’s independent monetary policy allowed it to adopt much more aggressive policies during the crisis, which were better suited to Czech economic conditions.

Policy Paper – Martin Zeman

The analysis is in PDF under the link below.