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CNB Rate Outlook Assessed After Wage Data, Parliament To Debate Fiscal Consolidation Package

CZECHIA
  • Weaker-than-expected Q2 wage data released yesterday missed market and CNB forecasts, which may ease concerns of Bank Board members worried about the risk of a wage-price spiral, potentially strengthening the case for sooner rate cuts. In their morning note, CSOB highlight that wage pressures cooled across most important sectors of the economy (industry, construction, services), while wages in financial services may have been boosted by larger one-off bonuses. They note that the broad-based decline in wage pressures may prompt some Bank Board members to consider lowering interest rates already this autumn. However, in their view, the CNB will need to monitor next year's wage negotiations and the planned public-sector salary hikes to assess the scope for monetary easing. CSOB expect the CNB to cut rates by 50bp to 6.50% this year and further to 4.00% in the course of next year.
  • The Chamber of Deputies is due to debate the government's fiscal consolidation package in second reading this afternoon. Senior KDU-CSL lawmaker Ales Dufek said that "it will be perhaps the most difficult, most demanding and probably the most complex meeting of this House so far," with parliament set to discuss dozens of amendments.
  • ANO lawmaker Alena Schillerova said that the party will challenge the government's pension reforms in the Constitutional Court. The legislation will take effect from October rather than September after President Petr Pavel refused to sign it by the end of last month.
  • The CNB announced that Governor Ales Michl, Deputy Governor Jan Frait and Bank Board's Jan Kubicek will speak at the CNB Discussion Forum hosted by the Tomas Bata University on October 17.
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