Analytics Surprised by Rising Food Prices

Inflation in the Czech Republic has fallen from 12.7% to 11.1% between April and May, mainly due to a comparative basis. However, the rise in food prices, which contributed to the 0.3% monthly inflation, was a surprise. Analysts expressed concerns about achieving a two percent inflation target next year.

The decline in year-on-year price growth was due to the high basis of comparison in May, particularly in housing, food, and fuel prices. UniCredit Bank economist Patrik Rožumberský said that the trend of slowing year-on-year price growth continued. He warned that the journey to the two percent inflation target would be extended.

Raiffeisenbank analyst Vratislav Zámiš predicts that year-on-year inflation will reach single digits in June. Still, inflation will remain above the upper limit of the tolerance range even next year. Creditas Bank’s chief economist, Petr Dufek, said that the monthly result of inflation could not be considered encouraging.

The significant risk to inflation next year is the inflation itself, according to Jakub Seidler, the chief economist of the Czech Banking Association. According to analysts, the Czech Statistical Office (CSU) has released data on May inflation, which sends mixed signals to the Czech National Bank’s board of directors, which will discuss interest rates next week.

Most experts expect the vote to increase interest rates will not prevail, but the Czech National Bank will probably only reduce rates later than expected, possibly at the end of the year.