Czech Republic’s unemployment rate went up in January to 3.9%
The unemployment rate in the Czech Republic increased to 3.9% in January, according to figures released by the Labor Ministry on Wednesday. This was the highest level since May 2021, but lower than the 4.0% expected in a Reuters poll.
Last month, there were 281,141 open jobs, the lowest since April 2018. The number of jobs has dropped every month since March, when it reached 363,917.
According to Radomir Jac, chief economist at Generali Investment CEE, “the domestic labor market is gradually being affected by the cooling of the Czech economy, and it can be assumed that the unemployment rate will continue to rise year-over-year in the months ahead and that its annual growth will accelerate.”
Euro zone bond rates increased on Wednesday for the fourth day in a row. The day before, the ECB announced it would reduce the interest rate it pays governments on deposits.
The most vulnerable to changes in inflation and interest rate expectations are two-year German yields, which increased as much as 11 basis points (bps) to 2.725% in early trading, their highest level since January 3.
For the fourth day in a row, Italian yields (IT2YT=RR) surged, jumping as much as 14 bps to 3.334%, their highest level since late September, when they reached a 10-year top of 3.39%.
The ECB started giving rewards to public-sector deposits last year to stop money from leaving the fixed-income market. Since the ECB bought a lot of government bonds, there are fewer top-rated bonds available. The ECB is fighting runaway inflation with consistent rate hikes.
As the outlook for inflation worsens, Iceland’s central bank boosts its benchmark rate
The Icelandic central bank warned of more monetary tightening to reduce inflation, which has become entrenched in the economy, and hiked its key policy interest rate by half a percentage point to 6.5% on Wednesday, its first rate increase in 2023.
The Monetary Policy Committee (MPC) of the central bank projected economic growth of 7.1% in 2022, exceeding its earlier estimate of 5.6%. However, the entity stated that it anticipates growth to slow to 2.6% in 2023. It was reported that even if the rate of inflation may have peaked in January at 9.9%, it will take longer than expected to return to the central bank’s target of 2.5%.
In Iceland’s private sector, recently concluded wage negotiations had resulted in higher-than-anticipated pay rises, which, when combined with a depreciating krona, had deteriorated the inflation forecast. The central bank forecast an average inflation rate of 9.5% for the first quarter of 2023, while this year’s rate did not go below 5%. It does not anticipate that inflation will drop below 3% until the second half of 2025.
The MPC believes that the monetary stance will need to be tightened significantly more soon to ensure that inflation eases back to target within a reasonable amount of time.
