National Bank: Inflation should rise by up to 10 percent

Czech National Bank

The Czech National Bank expects inflation to continue growing for the next several weeks. The Bank’s director of budgetary forecasts committee, Petr Král, told Czech Radio that inflation should rise to 9 or 10 percent, but is unlikely to exceed that rate by more than a few months.

Last week, the Czech Statistics Agency released Czech inflationary data for December. The last month of 2021 saw year-on-year inflation rates rise to 6.6 percent, slightly above the Czech National Bank's original forecast of 5.6 percent.

Mr Král  told Czech Radio that the same factors which have been driving inflation up over the past several months will start driving it down in the near future.

“The ongoing tightening of the Czech National Bank’s monetary policy will also start having an effect over time. This, in turn, should ensure a decline in core inflation reflected in the price of goods and services. We expect this will happen during the first half of 2023.”

The former Czech representative to the World Bank, Jana Matesová, told Czech Radio that it cannot yet be clearly stated whether the country is being affected by a more international trend towards inflation, or by domestic economic pressures.

“A very powerful factor is the labor market, which shows that the Czech Republic has a specific sectoral structure, one that is different to most contemporary developed countries.”

Among domestic factors which may be having an impact, she cited unsatisfactory conditions for business, as well as ineffective state administration and legislation.

The Czech National Bank’s ongoing efforts to strengthen the crown have been criticized by the Czech Association of Exporters. The association’s vice-chairman, Otto Daněk, told the Czech News Agency on Tuesday that the policy will cost exporters hundreds of billions of crowns a year. The Czech economy is very dependent on exports and members of the association are currently also tackling other issues, such as pressure to raise wages, a lack of resources as well as inflation itself and the rise of energy prices.

The Czech crown is currently at its highest value in a decade and analysts believe that it is primarily the National Bank’s raising of interest rates which is behind the rise in the currency’s value.