Czech consumer price inflation likely to have decelerated in May

Czech Republic’s consumer price inflation on a year-on-year basis had dropped to exactly the Czech National Bank’s target. However, the inflation is expected to have come just above the target rate in May. According to a KBC Research report, Czech inflation is likely to have come in at -0.1 percent sequentially and is expected to have come in at 2.1 percent year-on-year.

It could be assumed that in May prices of alcohol and catering services rose a bit, but the prices decrease of fuel and some foodstuffs would completely erase this. Even if inflation is expected to slightly deviate from the central bank’s target, it is expected to continue be well below the latest central bank forecast that predicts year-on-year inflation of 2.6 percent. And it would probably remain so.

This would obviously also apply to monetary policy inflation. Therefore, inflation should continue not pushing the central bank to react rapidly by interest rate hikes, added KBC Research.