Commercial presentation Update: 13/05/2024 14:32
Issued by: 13/05/2024, 09:12
Prague – Year-on-year inflation in the Czech Republic accelerated to 2.9 percent in April from two percent in March. Compared to the previous month, consumer prices rose by 0.7 percent, according to the data of the Czech Statistical Office (ČSÚ). Inflation exceeded the expectations of the financial market and the Czech National Bank (ČNB), according to analysts, the difference was primarily caused by food prices. However, experts and the central bank do not expect a revival of the inflationary wave. However, according to experts, the CNB will probably slow down the rate of interest rate cuts due to the development of consumer prices.
In a European comparison, the Czech Republic deteriorated from ninth to 21st place against March among the 41 countries whose inflation is monitored by the Porto investment platform. Of the neighboring countries, only Austria had higher inflation, where it was 3.5 percent. Among the European Union states, Romania had the highest inflation at 6.2 percent, the lowest was in Lithuania, where it was 0.1 percent.
“April’s acceleration of year-on-year price growth to almost three percent was mainly caused by the increase in the prices of food, alcoholic beverages and fuel,” said Pavla Šedivá, head of the consumer price statistics department of the CZSO. In April, the prices of goods increased by 1.4 percent year-on-year in total, and the prices of services increased by 5.3 percent.
Compared to March, food prices rose by 1.7 percent. The increase in their prices was already indicated by an investigation by the CZSO in April, according to which nine of the 13 monitored items rose in price. The price of apples rose the most, when a kilogram rose by 9.07 percent to 37.28 crowns. A kilogram of plain wheat flour cost 7.04 percent more, the price reached 21.14 crowns.
Analysts expected April inflation to be around 2.4 percent, calling the published figure surprising. “The previously announced risk scenario that sellers will increase prices after Easter has been fulfilled, while food prices have played an important role in the fall in inflation since the beginning of the year,” commented Jakub Seidler, chief economist of the Czech Banking Association, on the development of food prices. He pointed out that the overall month-on-month inflation in April was 0.7 percent, which is half a percentage point higher than the long-term average.
The CNB’s forecast assumed inflation of 2.5 percent, the difference against reality was mainly caused by food. “While the forecast predicted a continued, albeit moderate, year-on-year decline in food prices in April, in reality, food prices rose slightly,” said Petr Král, director of the monetary section of the CNB. However, he emphasized that food prices are one of the most fluctuating items in the consumer basket. “The qualitative tone of the CNB’s spring forecast thus remains valid. According to it, inflation will move within sight of the two percent target throughout this year,” he said.
Even analysts do not expect a return of the inflationary wave of the previous two years. “Although inflation showed an unexpectedly strong acceleration in April, we do not observe signs of new risks in its structure that should push price growth further up. In addition, a relatively higher comparative base will affect inflation in the coming months. We therefore assume that by the end of the summer, year-on-year inflation will be close to the April value,” says UniCredit Bank economist Patrik Rožumberský.
Analysts assume that, in view of the development of inflation, the CNB will slow down the easing of monetary policy in June. While in February, March and May it lowered the base interest rate by half a percentage point each time, at the next meeting they expect only a half decrease. The basic interest rate of the CNB is now 5.25 percent.
CR inflation April Summary
