The consumer price indice (CPI) in the Czech Republic slowed to 2% year-on-year in June, beating market expectations of near-stagnant inflation, according to bne IntelliNews.
In May, inflation rose by 2.6% y/y. In monthly terms, the consumer price index decreased by 0.3% amid falling prices for transport, food, and soft drinks. The last monthly decline was observed in December.
Market analysts expect the Czech National Bank (CNB) to continue its policy of lowering interest rates at its August monetary meeting, with the local currency, the Czech koruna (CZK), weakening.
The year-on-year dynamics was mainly influenced by a slowdown in price growth in most segments of the consumer basket. Prices for food and non-alcoholic beverages decreased by about 4 per cent year-on-year, Pavla Sediva, head of the Consumer Price Statistics Unit at the Czech Statistical Office (CZSO), reported.
The growth of prices for fuels and transport lubricants slowed down to 6.1% y/y (compared to 10.8% in May). The recreation and culture sector also recorded a 0.1% decrease in prices of holiday packages (+8.4% in May).
The y/y increase was mainly influenced by the housing, water, electricity, gas and other fuels sector. There, prices for actual rents rose by 7%, prices for materials and maintenance and repair services increased by 4.7%, and housing prices climbed by 4.7%. Meanwhile, natural gas prices decreased by 7.9% and solid fuel prices fell by 3.8%.
On a monthly basis, prices for fuels and lubricants decreased by 3.7%, for cars the prices fell by 0.3%. In the food and non-alcoholic beverages sector, prices for milk, cheese, and eggs decreased by 0.9%, non-alcoholic beverages by 1.3%, smoked meat and sausages by 0.9%, fruit by 1%, and sugar by 7.3%.
Inflationary pressures persist
Analyst at the Czech Banking Association Jakub Seidler stated on Wednesday that the koruna weakened by 3% compared to the beginning of June. Analyst Vit Hradil of Cyrrus Consulting reported that the CPI development was “a significant surprise as the market expected a 2.4% value and the CNB 2.5%.”
Koruna is heading towards weaker values, it is losing several halers to euro, reaching up to CZK25.38 per €1.
An inflation rate of 2% is the CNB’s stated target. However, market analysts agreed that inflationary pressures remained as prices for services continued to rise significantly.
