(Bloomberg) -- The Czech central bank kicked off a debate on planned monetary-policy easing but steered clear of providing a clear outlook for rate cuts due to lingering inflation risks. 

The bank held the key interest rate at 7% for a 10th straight meeting on Wednesday, as expected, opting again for caution even as its own forecast implied rapid cuts from the third quarter. The decision was unanimous and Governor Ales Michl said the rate path will be higher than suggested by the baseline projection in the coming quarters.

Policymakers are weighing a stagnant economy and inflation that’s set to slow to the 2% goal early next year against potential price pressures from one of the lowest jobless rates in the European Union and a weaker-than-expected exchange rate for the koruna. Michl declined to comment on the likelihood of the first rate cut happening in 2023, saying he wants to ensure a decline in core price gauge next year and “deliver a period of low inflation.”

“We will be ready, we have a clear strategy, but the key is that at each bank board meeting we will assess new data,” Michl said, mentioning inflation trends, the job market, savings and consumption as the main variables for future decisions. “All options are open.”

The bank said that risks and uncertainties for price growth remain “significant.” The main upward risks include a potential increase in inflation expectations and the related threat of a wage-price spiral, a decline in savings, a longer effect of expansionary fiscal policy and rising oil prices. A bigger-than-expected economic downturn in Germany is the key anti-inflationary risk. 

Before the September meeting, several board members including Michl pushed back against market bets on large rate cuts. That prompted investors to scale back such wagers, with interbank prices now showing expectations for about 50 basis points of policy easing this year.

Later on Wednesday, board member Jan Prochazka said that the bank will try to avoid surprising investors and the public with its monetary-policy moves, but that it also won’t make commitments on future rate decisions.

“We don’t want to do something like our colleagues in Poland did, who cut rates relatively sharply, and surprisingly by 75 basis points,” Prochazka said on public TV.

Consumer-price growth eased to 8.5% in August, the slowest pace in 20 months, down from a peak of 18% a year ago. The inflation rate will rise temporarily due to statistical effects in October before falling sharply toward the target early next year, according to the central bank.  

Read more: Czech Central Banker Says 2023 Cut Possible But Caution Needed  

While the bank board appears to regard some inflationary risks as less acute than at the previous meeting, Michl sounded concerned about persistent core inflation, according to Jan Bures, chief economist at KBC Group NV’s Czech brokerage, Patria Finance AS. 

“We believe the central bank will be cautious and we still expect the first rate cut — by 50 basis points — pushed back until December, with a risk of an even later start of monetary easing,” he said.

--With assistance from Deana Kjuka and Joel Rinneby.

(Updates with board member’s comments starting in paragraph eight.)

©2023 Bloomberg L.P.