Czech consumer price inflation (CPI) pushed on to a five-year high in October, the Czech National Bank (CNB) reported on November 9.
CPI in Czechia rose by 0.5% on a m/m basis in the month, bringing the y/y rate to 2.9%, near the top of the central bank's target range.
The y/y inflation rate is now the highest since October 2012. It increased from a reading of 2.7% in September and was ahead of a Reuters poll consensus expectation of 2.8%. Analysts had believed that inflation for this year had peaked in September. The average rate of inflation over the past 12 months was 2.3% through September.
The Czech central bank has hiked rates twice in the last three months after holding the rate close to zero since 2012, due to fears of rising inflation that are being bourn out. The regulator raised its main interest rate by 25 basis points to 0.50% on October 2 as central bankers sought to combat inflationary pressures being generated by Europe's fastest growing economy.
The increase was the second 25bp hike since August when the central bank became Europe's first monetary regulator to commence a tightening cycle.
With Czech economic output growing by 4.7% y/y in the second quarter, wage settlements, amid the EU's lowest level of unemployment, are on the rise and the inflation rate is starting to feel the heat. Unions are presently typically demanding double-digit pay hikes.
October’s headline inflation number was in line the bank's prediction of a 2.9% y/y rise, but was still disappointingly high and almost burst beyond the CNB’s target rate of 2% +/- one percentage point.