Czech Real Wages Return to Growth After Two-Year Inflation Squeeze

Czech average wages grew by 4.8% year-on-year in real terms in the first quarter, the statistics office said on Tuesday, the first increase in over two years as inflation eased back to the central bank’s target range.

The real increase was higher than analysts’ median forecast of 4.1% and the Czech National Bank’s prediction of 4.2%.

Nominal wages increased by 7.0% year-on-year to begin 2024.

Central bank policymakers are closely tracking changes in wages as they navigate an easing policy started last December that has delivered 175 basis points in cuts to the key two-week repo rate, which stands at 5.25%.

Markets are watching for signs the central bank may slow its easing pace, after it cut in 50-basis-point steps at the past three meetings.

Worker wages fell consecutively in real terms for nine straight quarters to the end of 2023, as a surge in prices in the past few years pushed inflation to double digits.

“After nine quarters there was thus a turnabout, although in some economic activities – (like) industries – the wage of the employees has not increased in real term,” Jitka Erhartova, the head of the statistics office’s labour unit, said.

Inflation fell to the central bank’s 2% target in February before a surprise pickup to 2.9% in April, driven largely by food prices.

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