Czech Republic: Inflation rises in March from the prior month
Latest reading: Consumer prices were up 1.9% in annual terms in March, following a 1.4% increase in the previous month. Still, inflation remained within the Central Bank’s 1.0–3.0% tolerance band.
Relative to the prior month’s figures, there were higher price pressures for housing and utilities (+1.0% on a year-on-year basis vs +0.8% in February), transportation (+5.5% vs -1.5% in February) and recreation and culture (+2.5% vs +1.7% in February). In contrast, price pressures reduced for food and non-alcoholic beverages in March (+3.3% vs +4.0% in February).
Finally, consumer prices rose 0.60% in March on a month-on-month basis, following a 0.10% fall in the previous month.
Panelist insight: Erste Bank’s Jiri Polansky commented:
“Given the current developments in the Middle East, this year’s inflation should be higher than previously expected. In this regard, we expect high commodity prices to gradually affect price developments in other parts of the economy, including services. […] With the prolonging conflict in the Middle East, inflationary risk in the Czech economy increases. The [Central Bank] has already indicated that if domestic inflationary pressures (core inflation) intensify, it will be ready to raise rates. If there is no de-escalation and a relatively quick return of commodity prices downwards, the probability of such a scenario significantly increases. In this regard, we expect the [Bank] could implement two rate hikes this year, lasting for about one year. However, fiscal policy will also play a role, as potential strengthening of fiscal expansion could increase inflationary developments in the Czech economy medium-term.”