Czech inflation bucks regional trend as it accelerates in September

By bne IntelliNews October 9, 2015

Czech consumer prices edged up 0.4% y/y in September, accelerating from 0.3% in August, the statistics office reported on October 9.

Bucking the regional trend, the rise in inflation should help the Czech National Bank in its continued drive to defend its ultra-loose monetary policy. At the same time, it will likely also bring the curtain down on speculation of further moves to loosen conditions.

The September CPI reading was slightly above market expectations of 0.3%. It also sees the Czech Republic far more resiliant to deflationary forces than Hungary and Poland, which saw CPI sinking deeper into reverse last month.

The headline figure was, however, 2bp below the Czech National Bank’s (CNB) own forecast for the month. On a monthly basis, Czech consumer prices ticked lower by 0.2%, matching August's decline. 

The resumed fall in crude prices has proved the biggest drag on inflation across the region. Transport prices in the Czech Republic shrank 4.5% in September, deepening from a 3.7% fall the previous month. Fuel prices dropped 0.5% compared with a 1.2% decrease in August.

Overall, the data should alleviate any lingering concerns about deflation in the Czech Republic, analysts at Capital Economics note. Still, low global commodity prices and existing spare capacity mean the headline rate is likely to stay below the CNB’s 2% target over the next couple of years.

“Against this backdrop, while we don’t expect the CNB to loosen monetary conditions further, we do think the rate setting will continue to toe the same dovish line seen at last month’s rate-setting meeting”, the analysts write.

At its latest rate setting meeting on September 24, the CNB kept rates at effective zero and reiterated its commitment to defend the koruna cap. The CNB introduced the policy in late 2013, and has since pledged to keep the currency from gaining above CZK27 against the euro until the middle of 2016 at the earliest.


  Sept 2015, y/y  Aug 2015, y/y  Sept 2015, m/m 
Total 0,4 0,3 -0,2
Food and non-alcoholic beverages -0,5 -1,2 0,8
Alcoholic beverages, tobacco 5,3 5,1 0,4
Clothing and footwear 2,8 2,5 2,7
Housing, water, energy, fuel 0,8 0,8 0,1
Furnishings, households equipment and maintenance 0,3 0,2 -0,5
Health -7,2 -7,1 0,2
Transport -4,5 -3,7 -1,1
Post and telecommunication -0,7 -0,9 0,0
Recreation and culture 1,8 1,5 -3,5
Education 1,2 1,0 1,1
Restaurants and hotels 1,4 1,5 0,1
Miscellaneous goods and services 0,8 1,1 0,2
Source: Stats office      

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