- Hans Weber
- December 1, 2023
Czech Republic’s Inflation Falls to 11.1% in May, Concerns Arise Over Achieving Target
Prague, Czech Republic – Inflation in the Czech Republic has experienced a decline from 12.7% to 11.1% between April and May, primarily due to a comparative basis. However, the unexpected rise in food prices, which contributed to the 0.3% monthly inflation, has raised concerns among analysts regarding the achievement of the two percent inflation target set for next year.
The year-on-year decrease in price growth can be attributed to the high basis of comparison in May, particularly in housing, food, and fuel prices. Patrik Rožumberský, economist at UniCredit Bank, noted that the trend of slowing year-on-year price growth has persisted. However, he cautioned that reaching the two percent inflation target would be a prolonged journey.
Vratislav Zámiš, an analyst at Raiffeisenbank, predicted that year-on-year inflation would reach single digits in June. Nonetheless, inflation is expected to remain above the upper limit of the tolerance range even into next year. Petr Dufek, Chief Economist at Creditas Bank, expressed concerns and stated that the monthly inflation result cannot be considered encouraging.
A significant risk to inflation next year is the persistence of inflation itself, according to Jakub Seidler, Chief Economist of the Czech Banking Association. The recently released data on May’s inflation by the Czech Statistical Office (CSU) has sent mixed signals to the board of directors of the Czech National Bank, which is scheduled to discuss interest rates next week.
While most experts do not expect a majority vote to increase interest rates, it is likely that the Czech National Bank will delay rate reductions beyond the anticipated timeline, possibly until the end of the year.
The ongoing challenges and uncertainties surrounding inflation in the Czech Republic underscore the need for cautious monitoring and prudent policy decisions. Achieving the inflation target while balancing economic stability will require a comprehensive and nuanced approach from monetary authorities in the months ahead.
Article by Prague Forum