Czech Republic: Inflation rises in July
Inflation rose to 2.2% in July, slightly above June’s 2.0%. July’s print overshot market expectations. Looking at the details of the release, the uptick was mainly driven by a steeper increase in prices for recreation and culture. Meanwhile, price growth for transport, plus housing and utilities remained steady, and food and non-alcoholic beverages prices increased at a softer rate.
Still, the trend pointed down, with annual average inflation falling to 4.4% in July (June: 4.9%).
Lastly, consumer prices increased 0.66% from the previous month in July, swinging from the 0.26% fall logged in June.
Our panelists anticipate inflation to average over four times lower in 2024 than in 2023 and fall within the Czech National Bank’s 1.0–3.0% tolerance band; decreasing food prices on global markets and positive real interest rates will help moderate price pressures. On the other hand, inflation is set to remain above the band’s 2.0% midpoint due to a strong recovery in private consumption plus the expiration of energy price caps.
Regarding the potential future trajectory of inflation, Jiri Polansky, analyst at Erste Bank, stated:
“We project a more noticeable headline inflation towards the year’s end, potentially surpassing 3% in Q4. This is attributable to last year’s low base and the influence of various inflationary factors, including consumption recovery and wage growth. Developments in Germany introduce an element of uncertainty, as a delayed recovery in the German economy could suppress headline inflation in the Czech Republic.”