Czech Inflation Rates Drop Due to High Base Year

Analysts say consumer price inflation rates have dropped due to the high base year. The June inflation rate declined to 9.7% from May’s 11.1%, in line with the market’s expectations. The decline in annual inflation is mainly due to the high base year, which contributed to most sectors’ slowdown, despite rising prices in some areas.

Jakub Seidler, the chief economist of the Czech Banking Association, said, “The decline in year-over-year inflation in June was mainly due to the high base year, just like in previous months.” Most sectors contributed to the annual inflation slowdown, despite price increases in some areas.

The slowing of the inflation rate is due to the base year’s high comparison. The strong crown, decreasing international transportation costs, and cheaper raw materials and energy also create room for faster inflation rate declines, according to Petr Dufek, chief economist at Creditas Bank. Dufek added, “Although the Czech Republic has the most subdued demand of all EU countries, it is not yet reflected in-store prices.”

According to analysts, inflation rates are expected to continue to decline in the coming months. Miroslav Novák, an analyst at Akcenta, remarked, “The impact of the increase in consumption taxes on fuel will be negligible due to the weight of fuel in the consumption basket.” He added, “Given the development of agricultural producer prices, there is also room for food price hikes.”

According to Seidler, inflation rates are expected to slow down in the second half of the year. “While the decline in year-over-year inflation was relatively quick in the first half of the year, the decline is likely to slow down in the second half of the year, and annual inflation is unlikely to drop below the seven percent threshold,” he said.

Patrik Rožumberský, an economist at UniCredit Bank, commented, “During the third quarter, the inflation rate’s pace of decline will most likely weaken. The less favorable base, such as imputed rent, food prices, and fuel, will be responsible for this.” Generali Investments CEE’s Chief Economist Radomír Jáč stated, “By the end of this year, the overall year-over-year inflation rate could be around seven percent, to further significant slowing of year-over-year consumer price growth at the beginning of 2024.”