Czech inflation steady at 0.7% y/y in Oct, in line with market expectations

By bne IntelliNews November 10, 2014

Consumer price inflation in the Czech Republic stayed steady at 0.7% y/y for the second month in October, data from the statistics office showed on November 10. The reading was in line with market expectations but still below the lower band of the central bank’s target range of 1%-3% bolstering the bank’s view that monetary stimulus should stay in place until 2016.

In monthly terms, consumer prices ticked higher by 0.2% from September when they dropped by 0.2%. Analysts were looking for a rise of 0.1% according to a Reuters poll.

Housing and utilities charges (27% of the basket) edged up 0.1% on the month helping soften the annual drop to 0.6% in October from 0.7% in September. The annual contraction was mainly due to a 10.2% decline in electricity prices, while natural gas charges increased by 2.4% y/y and rents by 1.0% y/y.

The annual growth in food and non-alcoholic beverage prices (17% of the basket) accelerated to 2.5% in October from 2.2% the month before reflecting more expensive fruits.

Transport prices inched down 0.2% m/m boosting the annual growth to 1% from 0.4%.

The October annual inflation was 0.1pp below the central bank’s forecast for the month. The indicator has been running below the central bank’s target for months forcing the bank to launch in November 2013 the first in more than a decade foreign currency interventions to weaken the koruna and stave off the threat of deflation. The weak but still positive growth in the first ten months of the year confirms that the bank’s decision to use the exchange rate as an additional monetary policy instrument significantly contributed to averting the deflation threat.

The bank has said it will exit the weak-koruna regime no earlier than in 2016. Weakening the koruna became the central bank’s primary policy tool after it slashed its main two-week repo to effectively zero in 2012.

  Oct-14 y/y  Sept-14 y/y  Oct-14 m/m 
Total 0.7 0.7 0.2
Food and non-alcoholic beverages 2.5 2.2 0.1
Alcoholic beverages, tobacco 1.5 2.5 0.3
Clothing and footwear 3.2 2.9 3.5
Housing, water, energy, fuel -0.6 -0.7 0.1
Furnishings, households equipment and maintenance -0.5 -0.4 0.0
Health -0.5 -1.0 -0.1
Transport 1.0 0.4 -0.2
Post and telecommunication -2.8 -2.9 -0.1
Recreation and culture -0.3 0.3 -0.3
Education 1.3 1.3 -0.1
Restaurants and hotels 1.6 1.7 -0.1
Miscellaneous goods and services 2.2 2.6 0.1
Source: Stats office      

Related Articles

VW attempts to placate Czech passions over Skoda production move to Germany

Volkswagen on October 11 attempted to placate Czechs angered that their 'family silver' carmaker Skoda Auto ... more

Controversial Czech company threatens Kyrgyzstan with arbitration for loss of hydro contracts

Czech company Liglass Trading has threatened Kyrgyzstan with international arbitration for the annulling of contracts to build and run 12 hydroelectric power plants, Reuters ... more

CEZ’s attempts to sell Bulgarian assets reportedly suspended

The sale procedure initiated by CEZ for its assets in Bulgaria has been suspended, Bulgaria’s Energy Minister Temenujka Petkova said ... more