The year concluded with a modest deceleration in the rise of consumer prices in the Czech Republic. The year-on-year inflation rate for December stood at 6.9%, marking a 0.4 percentage point decrease compared to November. However, the average inflation for the entire year was recorded at 10.7%, making it the third-highest in the country’s history, according to data released by the Czech Statistical Office (ČSÚ).

In a month-on-month comparison, inflation witnessed a 0.4% decrease, primarily attributed to lower prices in the food and non-alcoholic beverages category. Notable drops included fruit prices by 5.6%, sausages by 2.7%, non-alcoholic beverages by 1.5%, and margarine and other vegetable fats by 6.6%. Fuels and oils also experienced a decrease, with prices dropping by 4.7%, while potato prices increased by 6.5%.

Examining the year-on-year perspective, the most significant contributors to the overall price increase were housing costs, specifically rent, water and sewer charges, and heat and electricity. However, gas prices registered a 7.7% decrease, and there was a slight drop in the much-discussed food prices (-0.3%). Specific items such as semi-fat durable milk (-28.3%) and eggs (-30.3%) experienced notable price reductions.

Statisticians highlighted that if the savings tariff from 2022 were excluded from the year-on-year comparison, inflation would be substantially lower, at 4.2%. ČSÚ added that goods prices rose by 7.6%, while service prices increased by 5.7%.

Looking ahead to January, the country anticipates re-pricing and VAT reshuffles. The December inflation slowdown is viewed positively by the Czech National Bank (ČNB), allowing room for further interest rate reductions, expected to be another quarter percentage point in February. The central bank’s future rate adjustments will depend on January inflation figures, reflecting traditional re-pricing at the start of the year and VAT reshuffles.

Article by Prague Forum