Czech inflation confirmed at 2.5 percent

Consumer prices in the Czech Republic rose by 2.5 percent year-over-year in April. Compared to the previous month, they increased by 0.5 percent, according to the Czech Statistical Office (CZSO). The agency thus confirmed its preliminary estimate from early May.

Inflation accelerated compared to March, when it stood at 1.9 percent, reaching its highest level in six months. Price pressures could intensify further in the coming months as higher energy and transportation costs are expected to gradually have a stronger impact on consumer prices.

Fuel prices are driving inflation

“The development of consumer prices in April was once again significantly influenced by prices for fuels and lubricants,” explained Pavla Šedivá of the CZSO. By contrast, the year-over-year price increase for food and non-alcoholic beverages was more moderate at 1.3 percent, partially offsetting the overall effect.

In April, diesel cost an average of 44.5 korunas per liter, equivalent to about 1.8 euros. Natural 95 gasoline sold for an average of 41.1 korunas per liter. According to Šedivá, these were the highest figures since October and November 2022, respectively.

In the transportation sector, consumer prices rose by 8.7 percent year-over-year. The increase was particularly sharp for fuels and lubricants: they became nearly 25 percent more expensive, following a 13 percent increase in March.

Alcoholic beverages and tobacco products also became more expensive. Prices for spirits and liqueurs rose by 5.8 percent, as did wine prices. Beer prices rose by 2.7 percent, and tobacco products by 5.6 percent.

In the housing, water, electricity, gas, and other fuels sector, rents rose by 6.3 percent. Water prices increased by 3.9 percent, sewage fees by 3.8 percent, and heating and hot water by 1.9 percent. Electricity, on the other hand, became 11.6 percent cheaper, and natural gas 5.6 percent cheaper.

Overall, goods prices rose by 1.1 percent in April, while services became 4.8 percent more expensive.

Central Bank Remains Cautious

“Although oil prices have continued to rise, their direct impact on overall inflation is likely to weaken, provided there is no further escalation in the Middle East,” said analyst Jan Slabý of Ecovis, according to the CTK news agency. At the same time, he pointed out that higher fuel prices could gradually feed through into the prices of goods and services, including food.

Analysts surveyed by CTK do expect inflation to rise further in the second half of the year. However, they still anticipate an average inflation rate of around 2.5 percent for the year as a whole.

The Czech National Bank left its key interest rate at 3.5 percent at its most recent meeting. It is likely to remain cautious in the coming months as well.

The Bank Council stated that its decision was made against the backdrop of exceptional uncertainty surrounding developments in the Middle East. It examined various scenarios for inflation and real economic development and concluded that monetary policy must remain relatively tight for the time being.