Czech inflation decelerates amid lower food prices - ING

Jakub Seidler, Chief Economist at ING, notes that Czech inflation decelerated to 2.3% in July from 2.6% in the previous month, driven mainly by lower food prices but core inflation accelerated further.

Key Quotes

“The July CPI decelerated to 2.3% from 2.6%, as expected, mainly on the back of lower food prices, which declined by 1.9% month-on-month (MoM). Food prices year-on-year (YoY) fell 0.1% in July after rising 2.7% YoY in June.”

“Though inflation came in below the Czech National Bank forecast of 2.6%, it is not a game-changer for the bank's latest monetary policy outlook. Indeed, the CNB confirmed last week that its July CPI did not incorporate the latest food prices survey.”

“Given the current favourable economic conditions, pro-inflationary risks stemming from an overheated labour market, a still relatively weak Czech koruna and recent CNB forecast indicating the need for further monetary tightening, we believe that one more rate hike this year is a done deal.”

“If the koruna’s appreciation remains muted, we could even see two hikes by the end of the year.”