Since the five-member coalition led by Petr Fiala took over the government, there have been occasional exchanges of words between the CNB and the prime minister. The prime minister recalls that the main task of the CNB is to fight inflation, which is still above the declared target of 2 percent. CNB Governor Aleš Michl has protested more than once that Fial’s government is also contributing to the high inflation rate by its actions. Now it’s back. Things have heated up again between the Strakova Academy, a seat of government, and the CNB.
Tensions are rising again between the Czech National Bank and the current ruling coalition of five. The central bank announced that inflation will rise again thanks to the government’s austerity package, which fell below 10 percent in June, according to the Czech Statistics Office.
“Early next year, changes in indirect taxes will have a negative effect on the growth of consumer prices and, overall, will be slightly supportive of inflation,” the CNB said. In a statement by the central bank CNN Prima News pointed out.
However, government MPs remain adamant that the consolidation package is the right move.
“The increase in consumer prices will mainly be due to the increase in consumption tax on tobacco and alcohol, so that the disadvantages will turn into higher prices,” declared Member of Parliament Jiri Havranek (ODS).
E15.cz server warnedIf the Czech Republic really wants to return to the CNB’s target of two percent inflation, it will be vulnerable.
Martin Lobotka, chief analyst at Consec Investment Management, cautioned that inflation signals are not positive.
Inflation is now 8.8 percent, which according to Lobotka is due to holiday prices and the desire to buy fuel, which is driving up their prices. However, the analyst believes the problems lie elsewhere.
“In manufacturing, even in construction, wage growth continues at rates miles from labor productivity growth. In the second quarter, year-over-year wage growth in manufacturing reached ten percent, construction reached 9.7 percent, while the decline in employment was smaller (1.9 percent and 0.4 percent, respectively), ” wrote Lobotka.
According to the analyst, because of this wage hike, sooner or later there is a risk that the inflation rate will get stuck somewhere between 4 and 6 percent, and it will be difficult to get it from there to 2 percent. CNP.
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Author: Milos Polak
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