Czech consumer prices rose 0.6% in both monthly and annual terms in April, data from the statistics office showed on May 10.

For the first time since June 2015, inflation last month was higher than the Czech National Bank's forecast, which was for a reading of 0.3%. The rise in the CPI will alleviate pressure on the central bank to find means to offer further stimulus.

“The driver was core inflation. This reflects that consumers are doing well and retailers are increasing their prices due to higher demand. Today’s figures will please central bankers as the inflation moved toward their [2%] target,” Komercni Banka analyst Viktor Zeisel said in a note.

The Czech National Bank (CNB) board said on May 5 it expects a possible exit from the currency cap on the koruna of CZK27 to the euro around the halfway point of 2017. However, battling against the threat of a decline into deflation, the rate setters also suggested they could move to further weaken the koruna.

Tomas Holub, executive director of CNB's monetary department, said in a note on May 10 that the April figures represent a slight inflationary risk to the CNB’s forecast, but extending the use of the exchange rate as a monetary policy instrument until mid-2017 should keep it in check.

“According to the [CNB] forecast, inflation will decline temporarily again close to zero in the near future," he wrote. "However, it will start to rise at the close of this year, hitting the 2% target at the monetary policy horizon and then slightly exceeding it. The overall upward cost pressures on consumer prices will re-emerge this year.”

"The current strongly anti-inflationary effect of import prices, stemming from a fall in producer prices in the euro area, will fade gradually,” the analyst added. The CNB board will issue its full inflation report on May 12. 

Behind the accelerating rise in prices for alcoholic beverages and tobacco, which in annual terms grew by 6.8% in April and by 3.6% in March, is an increase in excise tax as of the beginning of the year, the statistics office notes. The next biggest influence on the April figures were prices in housing, water, electricity, gas and other fuels and prices in recreation and culture.

“The growth in prices of recreation and culture, rent, other household expenditures, accommodation and catering signals positive domestic demand pressures,” Erste Bank pointed out, adding that the prices of services grew by 1.4 % y/y in April. “Overall inflation continues to be negatively affected by low prices of fuel and slow economic activity in the Eurozone. On the other hand, domestic demand and increases in the wage costs of firms are the main pro-inflationary factors.”

According to preliminary data from Eurostat, the year-on-year change in the average harmonized index of consumer prices (HICP) in EU states amounted to 0.0% in March. According to preliminary calculations, the HICP in the Czech Republic in March was 0.3% and in April 0.6%.

Consumer price index
D i v i s i o n	2014 constant weights (‰)	Previous month = 100	2/16	3/16	4/16	2005 average = 100	Rate of inflation*)
Total	1000.0	100.6	100.5	100.3	100.6	124.4	100.4
including:
Food and non-alcoholic beverages	180.6	100.2	98.4	98.4	98.3	131.1	98.8
Alcoholic beverages, tobacco	93.4	102.5	103.2	102.9	105.2	169.5	104.6
Clothing and footwear	39.2	103.5	102.6	102.5	101.9	90.6	102.7
Housing, water, energy, fuel	251.3	100.2	100.8	100.8	100.9	145.7	100.9
Furnishings, households equipment and maintenance	57.8	99.9	100.2	100.0	99.5	93.8	100.1
Health	23.0	100.5	102.0	103.0	102.7	156.5	95.8
Transport	100.9	100.9	97.8	96.4	96.8	98.7	96.4
Post and telecommunication	30.7	99.9	99.0	99.1	99.0	79.4	99.0
Recreation and culture	89.6	99.4	102.8	102.4	101.9	101.0	102.0
Education	6.2	99.9	101.1	101.1	101.0	123.8	101.1
Restaurants and hotels	58.1	100.2	101.1	101.3	101.2	132.6	101.3
Miscellaneous goods and services	69.2	100.4	100.2	100.7	100.7	121.7	101.0
*)  Ratio of basic index averages (2005=100) for last 12 months and previous 12 months