Deputy Governor of the Czech National Bank (ČNB) Eva Zamrazilová.
Prague – If the new forecast of the Czech National Bank predicted a ten percent rise in wages in May, the central bank would have to seriously consider tightening monetary policy. Deputy Governor of the Czech National Bank Eva Zamrazilová said this to members of the parliamentary budget committee today, when she presented them with a report on monetary policy from this February. The Czech National Bank stated in its estimate of key indicators that it published on February 3 that it expects this year's nominal wage growth of 8.5 percent, which would mean a real drop of 0.4 percent.
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According to recent data from the Czech Statistical Office, the average wage in the Czech Republic rose nominally by 6.5 percent year-on-year. Due to the increase in prices, however, it fell by 7.5 percent in real terms.
“The current forecast foresees an increase (of wages) of 8.5 percent. If this estimate were to increase significantly, let's put it more than ten percent, then I am afraid that this would really be a reason to further tighten the rates,” specified Zamrazilová at the request of CTK. “We have to analyze what is happening in the labor market in great detail, because that is one of the main sources of inflationary pressures. We have the only information so far, and that is the growth of wages in industry and in construction, which was above ten percent in both cases. We need to take a closer look at the structure of which part of enterprises had such high wage growth and try to find out whether it was, let's say, an anomaly, or whether it will be a persistent trend,” she described. “For me, this is an important signal that I will consider further tightening of monetary policy rates, although we will not have the exact numbers and the new wage growth forecast until the beginning of May,” said ČTK.
The CNB last raised the base interest rate last June, to seven percent. At the beginning of February this year, Governor Aleš Michl said that the bank board will consider at the next meeting whether to keep the rates at the current level or increase them. Another debate on the setting of interest rates will be held by the Bank Board on March 29.
According to Zamrazilová, the CNB sees further risks for inflation in the tight labor market. She recalled that only in January, after five years, did the number of unemployed exceed the number of vacancies. She repeated that the CNB expects inflation to fall in the second half of the year, when the increase in interest rates from last year will be reflected. The high comparative base from last year will also help reduce inflation. Inflation should reach the inflation target at the beginning of next year. According to her, another inflationary impulse is represented by a too loose budgetary policy. “Public finances send too much money into the economy, which is also an inflationary impulse,” she pointed out.
According to the vice-governor, another source of concern about the effect on inflation is foreign affairs. She pointed out that in its December report, the European Central Bank raised its inflation outlook for this year and next year and at the same time delayed the fulfillment of the inflation target until the end of 2025. “So there is a real risk that we will import inflation from abroad,” she said.< /p>
