Wage inflation in Czech economy leaves little room for monetary policy easing

Czech wage development report released today showed that Czech real wages grew strongly by 3.9% y/y in the first quarter, which is clear evidence that the economy is doing pretty well. Data beat Czech National Bank expectations for a slightly lower wage growth.

"The need for relax monetary policy is definitely lower now, because the wage-inflation is finally back in the Czech economy," said KBC Research in a report.

Czech economy’s overall sentiment remains positive. The Czech economy’s overall confidence and business mood rebounded again last month. The retail sector is booming with domestic customers increasing their purchases. Consumers are more upbeat than last year due to the optimistic expectations of the economy’s future development.

The central bank has said the likely end of its weak crown policy would come around the middle of next year and Rusnok said it was still 50-50 whether an exit could come sooner or even later than expected. In an interview, he said he saw no obstacles from the economy, which was among the fastest-growing in the European Union last year but is set to cool somewhat in 2016 before gaining speed again.