Czech inflation accelerates above CNB’s target rate in January, likely to rise higher in months ahead

Czech consumer price inflation accelerated in January, coming in above market projections and the Czech National Bank’s target rate. On a sequential basis, Czech inflation accelerated 0.8 percent in January from December’s print of 0.3 percent. The sequential rise in consumer prices was mainly driven by a rise in prices of food and non-alcoholic beverages, recreation and culture, and transport. Non-alcoholic beverages prices were up 1.9 percent. A fall in overall price level was mainly due to price decreases in clothing and footwear, where prices of garments dropped 3.8 percent and prices of shoes and other footwear fell by 4.3 percent.

On a year-on-year basis, the consumer price inflation accelerated 2.2 percent, a rise of 0.2 percentage points from December. The rise in year-on-year price level came in mainly because of transport where the increase in prices of automotive fuel accelerated to 11.6 percent. Meanwhile, price growth in alcoholic beverages and tobacco slowed. Price of alcoholic beverages slowed to 0.5 percent from December’s 3.1 percent. Food and non-alcoholic beverages mainly influenced the year-on-year price growth level in January.

Prices of goods and services in total rose 2.2 percent each. The overall consumer price index, excluding imputed rentals came in at 102.2 percent.

“In months ahead, inflation should rise even higher above the target of the central bank and the possibility of inflation returning below the target on monetary policy horizon (12 – 18 months) seems to be rather unlikely”, said KBC Market Research in a research note.