Czech central banker Zamrazilova warns against big wage increases

Czech central bank deputy governor Eva Zamrazilova warned that excessive wage demands would further fuel inflation, which is already the highest in three decades, and could force policymakers to repeat interest rate hikes. .

Zamrazilova criticized a recent government deal to raise wages by 10 percent for some public sector employees, saying it could prompt calls for similar increases in private businesses.

“It’s a very bad message for wage negotiations,” he said in a televised debate on Sunday, urging labor unions not to ask for increases of more than 6 percent.

Zamrazilova, who joined the rate-setting committee in July, was among a majority of board members who voted to keep rates on hold this month and end a year of aggressive monetary tightening. With inflation expected to peak around 20% this year, she said the council would monitor wage trends as a key factor in its policy discussions.

The central bank should “raise interest rates sharply further” if there is a threat of a wage price spiral, according to Zamrazilova.

Soaring gas prices are the main driver of inflation and European Union member states must agree on a common measure to bring energy costs under control, Zamrazilova said.

He added that an EU-wide cap on energy prices is a better solution than imposing an emergency tax to fund local measures.

The government in Prague is considering imposing what it calls a “war tax” on energy companies, banks and fuel producers and distributors. The tax would target windfall profits caused by the effects of the war in Ukraine, such as soaring energy prices and higher interest rates.