Inflation has no end in sight: it reached 16 percent in May

Consumer prices continued to rise in May. The annual inflation rate increased to 16.1% in May, up from 14.2% in April. This is the eleventh consecutive month of growth. The data was published by the Czech Statistical Office (ČSO) on Friday. Inflation increased by 1.8 percent month on month.

“Consumer prices have significantly accelerated their year-on-year growth, this time up to 16%. The month-on-month increase of 1.8% was mainly due to the rise in food prices,” said Jiří Mrázek, Director of the CSO’s Price Statistics Department.

In the food and non-alcoholic beverages section, statisticians recorded a year-on-year increase of 15.1 percent, up from 10.7 percent in April. Flour prices, in particular, increased by 64.6 percent year on year.

Among specific foodstuffs, bread (up 25.4 percent year-on-year), poultry meat (up 30.7 percent), edible oils (up 47.8 percent), and sugar (up 32.1 percent) were the most expensive.

In transport, the prices of cars rose by 13.9 percent and fuel and oil by 44.3 percent. Clothing (22.9 percent) and footwear (16.8 percent) also rose.

For housing, natural gas rose by 49.2 percent, solid fuels by 30.1 percent, electricity by 30.8 percent, and heat and hot water by 17.8 percent. In the food services and accommodation sections, prices increased by 22.8 percent and 18.1 percent, respectively.

Housing accounts for one-third of inflation

“On a year-on-year basis, the housing, water, energy, and fuel sections were the center of gravity of price increases in May (about one-third of inflation), mainly due to sharp increases in electricity, gas, and so-called imputed rent. However, with a few exceptions, all sections of the consumer basket increased significantly, “said Miroslav Novák, an analyst at Akcenta.

He also pointed out that May inflation significantly exceeded the Czech National Bank’s estimates, which envisaged a 14.9 percent increase.

“The high May inflation combined with the CNB board reshuffle creates room for central bankers to raise interest rates for the last time by at least 100 basis points at the end of June,” Novák added.

According to Lukáš Kovanda, chief economist at Trinity Bank, the CNB will resort to an even sharper base rate rise by 1.5 percent to 7.25 percent.

“Even so, it will be difficult to tame inflation. In June, inflation will accelerate further, approaching 17 percent, which, by the way, is roughly the inflation rate of Russia,” he noted.