Consumer prices in the Czech Republic increased by 0.2% y/y in February 2014, the same as in the previous month as a faster growth in food and alcohol prices was offset by weaker rises in transport costs, data from the statistics office showed. The annual rise was in line with market expectations and was the weakest in more than four years.

In monthly terms, consumer prices edged up by 0.2% in February, accelerating slightly from a 0.1% hike in January.

Housing and utilities charges (27% of the basket) ticked higher by 0.1% on the month keeping the annual drop at 2.4% for the second straight month in February. The annual contraction was mainly due to a 10.5% decline in electricity and a 9.1% drop in natural gas charges.

Food and non-alcoholic beverage prices (17% of the basket) fell by 0.1% m/m in February leading to a 4.2% annual growth of the component, faster than January’s hike of 3.9% y/y. Transport prices remained unchanged on the month in February easing the annual expansion to just 0.1% from 1% in January. The annual growth in alcohol and tobacco prices also accelerated to 4.2% in February from 3.8% in January driven by a 0.1% m/m rise.

The February annual inflation was by 0.2pp below than the central bank’s forecast for the month and below the lower band of its target range of 1%-3%. The indicator had been running below the target up to November 2013 when the bank was forced to step into the currency market to weaken the koruna and ward off deflation threat. The effect of the weakening of the koruna as a result of the central bank’s currency interventions will be more pronounced in the spring months as so far the falling utility charges have been offsetting the impact of the weaker koruna.