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Czech Inflation Accelerates for Second Consecutive Month
Czech inflation accelerated for a second consecutive month due to rising fuel prices. Bloomberg expects the central bank to maintain a wait-and-see stance on interest rates at this...
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Czech inflation accelerated for a second consecutive month due to rising fuel prices. Bloomberg expects the central bank to maintain a wait-and-see stance on interest rates at this weeks policy meeting.

According to a preliminary estimate released by the Czech Statistical Office on Wednesday (6th), consumer prices in April rose 2.5% YoY. Service sector prices increased at a faster pace of 4.8%, remaining at a relatively elevated level.

The report noted that policymakers at the Prague-based central bank are weighing the inflationary impact of surging energy prices against the potential downside risks to economic growth from a possible global slowdown triggered by conflicts in the Middle East. Officials have repeatedly stated that they will not react directly to spikes in fuel prices but will closely monitor the risk of price pressures spreading to other goods and services.

Martin Komrska, Chief Economist for the Czech Republic and Slovakia at UniCredit Bank, said that if energy costs gradually feed through into a broader range of prices in the coming months, it could trigger potential rate hikes. He expects that before autumn, there will be no majority within the bank board in favor of tightening monetary policy.

In addition, several policymakers indicated that a rate hike appears to be the most likely next policy move, but there is no need for urgency, as below-target inflation at the beginning of the year and relatively tight monetary policy before the outbreak of the Iran conflict provide a buffer against the direct impact of rising energy costs. (hc/u)

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