CZECHIA: Upbeat Wage Data Seen As Hawkish Signal

Sell-side analysts argue that above-forecast Q2 wage data released this morning reduce the odds of further CNB interest rate cuts in the near term.

• Česká spořitelna note that low unemployment, the recent significant decline in real wages, wage growth in the public sector, a minimum wage hike, and ongoing economic recovery positively affected overall wage growth. They expect these factors to continue to have an impact going forward. Following recent beats in GDP and wage data, Česká spořitelna are looking to revise their economic forecasts for this year higher. In their view, today's pro-inflationary data should support interest-rate stability. They currently expect the next cut to be delivered only in 2027, but admit that a 25bp cut in 2026 cannot be ruled out.
• Komerční banka write that nominal wage growth continues to be driven by the private sector (+8.3% Y/Y versus +6.5% Y/Y in the public sector), while the overall figure significantly exceeded the CNB's forecast and market consensus. They note that real wages are approaching pre-pandemic levels. From a longer-term perspective, real wages are catching up with the trend in labour productivity, rising faster than productivity at the moment, which probably doesn't generate excessive inflationary pressures though. Komerční banka think that the data will reaffirm the central bank's reluctance to lower interest rates.
• Raiffeisenbank describe the data as a 'big surprise' and note that the net average wage is back to its historic highs, mainly due to the abolition of the super-gross wage in 2021. Raiffeisenbank note that the CNB closely monitors wage developments and they think that above-forecast data imply a 99% chance that the central bank will leave the repo rate unchanged this month.