Consumer prices in the Czech Republic stayed flat on the year in June 2014 after edging up to 0.4% y/y the month before mainly due to lower food prices, data from the statistics office showed. The reading missed market expectations for a 0.1% y/y hike.

In monthly terms, consumer prices also remained unchanged from May, when they ticked higher by 0.1%.

Housing and utilities charges (27% of the basket) stayed unchanged on the month softening the annual drop to 1.4% in June from 1.5% in May. The annual contraction was mainly due to a 10.5% decline in electricity prices and a 3.1% fall in natural gas charges.

Food and non-alcoholic beverage prices (17% of the basket) swung to a 1.1% y/y decrease in June from May’s 2.5% y/y rise reflecting a 0.9% monthly decline.

Transport prices rose 0.3% m/m helping keep the annual growth at 0.6% for the second straight month.

The June annual inflation was 0.5pps below than the central bank’s forecast for the month and below the lower band of its target range of 1%-3%. The indicator has been running below the central bank’s target for months forcing the bank to launch in November 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 months of 2014 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 said that it will exit the weak-koruna regime no earlier than in the second quarter of 2015.