Comment by Jaromír Šindel, Chief Economist of the CBA: The stronger quarter-on-quarter GDP growth of 0.8% in Q3 mainly reflected foreign trade, while the contribution of domestic demand was not as strong as in the previous quarter. Moreover, there has been a continuous decline in fixed investment excluding construction investment, undermining the future potential of the economy and keeping productivity growth low and fuelling inflationary growth in unit labour costs (see five key points below).

Comment by Jaromír Šindel, Chief Economist of the CBA: The return to stronger economic growth of 0.7% quarter-on-quarter in Q3 was a surprise, confirming the indications of stronger confidence in September. At the same time, stagnant employment added a welcome return to stronger productivity, which may partially dampen the hawkish impulse of stronger GDP for the CNB. The CNB will most likely leave interest rates unchanged at 3.5%, not only at the November meeting, but GDP details may set a more distinct tone to its communication later in November.

Commentary by Jaromír Šindel, Chief Economist of the CBA: Higher-than-expected wage growth will be the main, but not the only, reason for keeping the interest rate at 3.5% at the CNB's September meeting and for the intensification of the hawkish tone in the communication. The latter may indeed indicate a further upward movement in the interest rate, but rather in an unspecified distant horizon. A stronger koruna or tighter monetary policy through the longer end of the yield curve is unlikely to lead the CNB to a dovish mindset.