Unions have estimated inflation at around 5% this year as a base for collective bargaining, but consumer price growth jumped to a nine-year high of 7.5% in January, catching the market off guard. “We have no choice but to demand a wage compensation from employers,” unions chief Milan Stech told Reuters after meeting government and employers representatives. “We want inflation plus 3%, so at least 3% growth in real wages. We recommend opening negotiations again if they have been closed already,” he said.
Central bank (CNB) board member Vladimir Tomsik said earlier this week it would have to tighten monetary policy if excessive wage demands threaten to boost inflation. The January price spike has already sparked expectations that the Czech National Bank could delay any interest rate cuts beyond the end of 2008, and even revived speculation the bank may tighten policy further after 200 basis points worth of rate increases since late 2005. The CNB last raised the key two-week repo rate by 25 basis points on Feb. 7 to a near six-year high of 3.75%. Tomsik has said inflation expectations were key for future monetary policy decision. (Reuters)
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