Bank chief says Europe’s highest inflation rate no cause for concern

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The Czech Republic currently has the highest inflation rate in the entire European Union, with foodstuffs among the items that are shooting up in price. However, the governor of the central bank says the level of inflation is not a major cause for concern.

Photo: Pixabay,  CC0

According to Eurostat, the Czech Republic is seeing prices increase at a faster clip than any other state in the EU. The latest figures, for April, show Czech inflation at 3.3 percent. The Czech Statistics Office puts the rate at 3.2 percent.

Pavel Mikoška,  photo: Jana Přinosilová,  ČRo
Ordinary Czechs are feeling the pinch most keenly in their shopping baskets, with fruit and veg prices in particular shooting up. Apples, for instance, cost over a third more than they did this time last year.

Pavel Mikoška oversees quality at the Albert supermarket chain and is deputy head of the Czech Confederation of Tourism and Commerce.

“There are several causes. We in the Czech Republic have benefited for a long time from a surplus of produce on European markets. That situation is more complicated now. For instance, there is a lack of seasonal workers, both here and in other states – and that is resulting in a shortage of seasonal fruit and vegetables.”

Energy prices and some services and are also costing Czechs more these days.

However, the governor of the central bank, Jiří Rusnok, told Czech Radio that the inflation rate is no cause for concern, explaining that it reflects the fact the country also the EU’s lowest unemployment.

Jiří Rusnok,  photo: Filip Jandourek,  ČRo
“Naturally, the lower unemployment is, the greater the pressure on price growth. In economics tt’s called the Phillips curve. That’s why we are among the countries with somewhat high inflation. But I’d like to emphasise that we don’t have extreme inflation – it’s just around one percentage point above our target.”

Mr. Rusnok says that in any case the Czech economy is over the hump in this regard.

“It hasn’t actually been growing for two months. The peak was at the end of last year or the beginning of this year, when the consumer price index reached 3.6 or 3.7 percent. In April it was 3.2 percent and we hope for May it will be under 3 percent. It will then fall faster, to around 2 percent.”

The Czech National Bank chief also says that the coronavirus crisis will cause prices to cool.

“The effect will occur automatically. Because that crisis is of course here and in a situation where demand falls markedly, which we are experiencing and will experience, then pressure on price growth is far lower.”

Jiří Rusnok also dismissed the suggestion that the Czech Republic not having the common European currency was pushing prices up. He offered the example of Slovakia, which has the euro and also ranks among the EU states with the highest inflation.