Holub Warns Of Partially Materialising Wage-Price Spiral Risk

CNB's Tomas Holub said at a CSOB corporate banking seminar that we are seeing a partial materialisation of the risk of a wage-price spiral, while preventing such developments becomes a priority over the possible negative effects of an increase in interest rates on the real economy in a low-unemployment environment.

• Holub is the most hawkish Bank Board members and unsuccessfully sought a 50bp rate hike at the most recent meeting, alongside his colleague Karina Kubelkova. While Kubelkova changed her vote from holding rates steady, Holub has earned his reputation as a regular hawkish dissenter.
• A research note published by CNB staff earlier this month showed that their gauge of the risk of a wage-price spiral reached historic highs last year. Furthermore, their calculations implied the materialisation of this risk and suggested that it will remain elevated through 2023.
• Commenting on his own monetary policy considerations, Holub pointed to elevated inflation expectations. He argued that poor measurability of inflation expectations should not lead to their underestimation, they play a role in various parts of the economy.
• Fiscal consolidation is an anti-inflationary risk to the CNB's baseline forecast, but only if much of it does not take place through increased indirect taxes.