Year-on-year growth in consumer prices accelerated to 8.5 percent in October from September’s 6.9 percent, the Czech Statistical Office calculated. This is the first month in eight months that inflation is accelerating. Compared to last month, prices went up by 0.1 percent. However, the figure for October is influenced by technicalities – that is, by the fact that a year ago statisticians included in the calculation the government’s energy-saving tariff as a discount on electricity.
“In the case of year-on-year higher inflation, it is definitely not a second wave of inflation, but primarily a statistical-technical effect of the lower comparative base from last year,” explains ČSOB analyst Dominik Rusinko.
After last year’s introduction of the energy-saving tariff, there was an artificial reduction in inflation. This subsequently created a low comparative base, which now leads precisely to an increase in year-on-year inflation. “If we did not include this cost-saving tariff in the calculation, the price increase would amount to 5.8 percent,” specified Pavla Šedivá, head of the CZSO consumer price statistics department.
Housing prices had the greatest influence on the year-on-year increase in price levels in October. The second in order of influence was the prices of food and non-alcoholic beverages.
Central bankers kept the key rate at seven percent at their last meeting. “And the three-month rate has been rising since then, which means that the markets stop believing that the rate cut will happen at the December meeting,” explains Citfin analyst Tomáš Volf. “Since there will probably be no monetary negotiations in January, the next possible date is in February. Central bankers are aware that inflation is currently falling at a slower pace than they originally expected,” he adds.
Volf believes that the goal of reducing average inflation below ten percent this year is under threat. “And to get it below 2.6 percent for next year as well. According to the words of CNB Governor Aleš Michl, the reduction will be gradual, which in translation means that there will be no rush, which plays into the cards of imports, because the weak crown will make the position of Czech importers more difficult. ” adds Volf.
In contrast, BHS economist Štepán Křeček believes that the canceled energy tariff will only affect Czech inflation until the end of the year. “Already next year, inflation will drop significantly and move close to its target,” he estimates.
Patrik Rožumberský from UniCredit estimates the situation similarly. “In November, inflation will probably go down again. This will be helped by the effect of a higher base, especially for energy and food. If we count on the fact that inflation will roughly stagnate month-on-month in November and December, year-on-year inflation will show a value slightly above seven at the end of the year percent. A large downward movement is likely to await us in January, when according to our calculations, inflation will reach the range of three to four percent,” he predicts.
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