Jiří Rusnok’s policy of using interest rates to revalue the crown, which we first identified onJune 28, 2018, met with little resistance from analysts, companies or politicians for four years (with a one-year covid break), because the crown had a natural tendency to appreciate. The CR was a hot investment location, and Rusnok was merely giving the currency an extra little boost by systematically increasing the interest-rate differential. Almost no one complained during the sunny days, but the situation is changing now that the clouds are gathering. It is becoming increasingly clear that the crown is fundamentally weak but artificially strong. Analyst Vít Hradil of Cyrrus doesn’t think the CNB can keep up the currency intervention for more than a few months. Rusnok’s comment on June 11 about an equilibrium rate of Kč 24-25/euro now looks almost criminally misleading. Without the heavy intervention, it would likely be more like Kč 26/euro. Rusnok is gone, and his game is almost up.

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