CNB board meeting minutes show concern over inflationary pressure

Minutes from the Czech National Bank board meeting of June 27 – when policymakers raised the main interest rate by a quarter point to 1 per cent – show growing concern over inflationary pressures stemming from the tightening labour market and corresponding high wage growth.

The jobless rate dropped to 2.9 per cent in June, the lowest in the EU. In the first quarter of 2018, Czech average wages rose by 8.6 per cent, also outpacing the EU average.

The Czech annual inflation rate rose to an eight-month high of 2.6 per cent in June from 2.2 per cent in May, widening the gap between the rate and the central bank’s 2 per cent target.

Rising foreign producer prices, including commodities, pose an inflationary risk in the short term while global uncertainty associated with the impact of Brexit could have an anti-inflationary effect in the longer run, the CNB said.