Inflation in the Czech Republic hit a new 13-year high in November, and while the rise was less pronounced than in the past four months, the central bank seems likely to continue tightening its policy.
Inflation in the economies of Central Europe is growing stronger than their European counterparts with external problems such as supply shortages and rising energy costs, combined with domestic factors such as tight labor markets and strong wage growth.
The central banks in the region have reacted with sharp interest rate hikes, with the Czech central bank being among the most aggressive, having raised interest rates by 200 basis points since September.
Inflation in the Czech Republic rose to 6% in November, the highest level since October 2008. Analysts estimate that the central bank will raise interest rates further, according to estimates.
Inflation is 1% higher than the central bank’s target. An analyst at Komercni Banka comments that “the reluctance of the koruna to strengthen is in favor of tightening monetary policy.”
He expects a 50 basis point increase in the Czech Republic’s key repurchase rate, which stands at 2.75% now, and sees further increases as inflation is expected to peak next year.
Source From: Capital
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