Growth of the consumer price indices slowed down to 1.8% year on year and dropped by 0.1% month on month in April (chart), according to the flesh estimate released by the Czech Statistical Office (CZSO).

It is down from 2.7% in March and the lowest y/y inflation level since March 2018, the Czech Press Agency (CTK) noted, and beat the expectations of market analysts who projected inflation would not ease below 2%.

“However desirable development this is, the final number looks better than its structure does,” head economist at UniCredit Bank, Pavel Sobíšek, was quoted as saying by CTK, pointing out that y/y prices of services accelerated to 4.7%, up on 4.5% in March.

Energy prices eased to 3% y/y, down from 3.8% in March, while energy, food, alcohol and tobacco prices stagnated at 2.9%.

Analysts surveyed by CTK also agreed that the chances of the Czech National Bank (CNB) resuming its policy of lowering interest rates increased. The CNB board is to meet on May 7, and the flesh estimate released the day before is designed to aid the board in its monetary decision-making.

As bne IntelliNews covered in April, CNB kept the key interest rate unchanged at 3.75%, which is the lowest since January 2022.  

Deloitte’s head economist, David Marek, told CTK that “another argument for the loosening of monetary policy is gradual worsening of the economic growth prospects for this year, particularly in connection with the impact of new tariffs on exports from the EU to the US.”

“It appears that the potential May rate cut may be the last. For now, we are keeping the August rate cut in our forecast, but this will be subject to revision depending on central bank communication,” following the May 7 board meeting, ING wrote in their monetary preview last week.

Czechia’s export-oriented and industry-based economy is bracing for the impact of the 20-25% tariffs on imported EU goods that Donald Trump’s administration imposed last month.

Last month, the International Monetary Fund (IMF) worsened the projected growth of the Czech economy to 1.6% this year, significantly down on the 2.4% projection from its autumn forecast last November.

Earlier in April, the country’s Ministry of Finance lowered its projection by 0.3 percentage points to 2% growth this year, but the ministry calculates with 10% tariffs, not 20% currently deferred by the Donald Trump administration, the CTK noted.