Czech inflation accelerated to 2.7% year-on-year in February, up by 0.2 percentage points compared to January, influenced mainly by increase in y/y price level of housing, water, electricity, gas and other fuels, according to the Czech Statistics Office’s data released on March 11.
“The month-on-month rise in consumer prices in recreation and culture was due to especially higher prices of package holidays by 4.9%. In food and non-alcoholic beverages, prices of vegetables went especially up by 7.6%, of, which prices of potatoes were higher by 9.8%. … The price rise in housing, water, electricity, gas and other fuels came primarily from higher prices of natural gas by 2.5% (partly due to the ending of discounts since February 2018), electricity by 0.6% and actual rentals for housing by 0.4%,” the office said.
In annual term, the prices of housing, water, electricity, gas and other fuels also increased. Prices of electricity grew by 8.9%, natural gas by 3.6%, heat energy by 4.2%. Prices of transport slowed down its growth to 0.1% from 1.6% in January.
“In alcoholic beverages and tobacco, prices of spirits were higher by 4.5%, beer by 2.5% and tobacco by 4.3%. The impact on the price level increase had also prices in miscellaneous goods and services, where prices of personal care rose by 4.5%, insurance by 5.2%, and financial services by 4.3%. … In restaurants and hotels, prices of catering services were higher by 4.1% and prices of accommodation services by 2.2%,” the text read.
“While inflation will accelerate further over the next two months (though it should remain within the CNB tolerance band), from May it should start to slow to close to 2%. Therefore, we do not think the CNB will be under pressure to deliver any imminent hike in March, with current inflation a “lost battle”. More relevant for the central bank is inflation over the monetary policy horizon. Based on our estimate, this is just above 2%,” the ING Chief Economist Jakub Seidler said.
“All in all, we still expect the CNB to deliver two hikes this year. The Czech economy is in relatively good shape although the global outlook continues to deteriorate. But despite inflation (at 2.7% y/y) being above CNB expectations (2.4%), we prefer the May meeting for the first hike, as there will be a new forecast available. There is only one month between the end-of-March meeting and the beginning-of-May meeting, which,” he added.