Economists Predict Lower Inflation

Recent discussions among economists suggest that fears over January’s overpricing in stores may persist, yet the inflation rate this year will undoubtedly relax significantly. Governor of the Czech National Bank, Aleš Michl, anticipates a significantly weaker growth of consumer prices this year than in the last.

According to the Czech National Bank’s current forecast, the average year-on-year inflation should drop to 2.6 percent this year from the 10.8 percent estimated for the last year. Simultaneously, it expects at least weak growth of the economy by 1.2 percent after a decrease of around 0.4 percent last year.

In December, Michl justified reducing the base interest rate by a quarter of a percentage point to 6.75 percent due to the subsiding inflationary pressures and the need to stimulate the economy. This was the first change in the CNB’s rates in the last year and a half. The bank has another monetary meeting scheduled for the beginning of February to bring inflation down to two percent as soon as possible.

Former central bank governor Jiří Rusnok criticized New Year’s cYear’s in value-added tax, which will destabilize the price level, but he also expects inflation to fall this year. “January”2023, when the prices of energy for households increased sharply, will certainly not be repeated this January. For 2024, I estimate the average inflation in the three to four percent range,” Rusnok” said in a pre-Christmas interview.

Economists point out that cost pressures have already disappeared, and there is no reason for further price increases. “Prices “of industrial producers stagnated last year; they even fell relatively briskly in agriculture. Companies are not forced to increase prices, and the only motivation could potentially be a clear willingness of customers to pay extra,” said “the chief economist of Cyrrus, Vít Hradil. However, this is not expected, as household consumption remains subdued.