Consumer price inflation exceeds central bank’s target rate

Czech consumer price inflation accelerated unexpectedly at the start of the year, coming in above market projections and the Czech National Bank’s target rate. The 2.2 percent year-on-year growth in consumer prices registered in January was reportedly driven by growth in the prices of fuel, food, non-alcoholic beverages and restaurant services.

Illustrative photo: Štěpánka Budková

According to figures released by the Czech Statistics Office on Friday the consumer price index rose 2.2 percent year-on-year in January, up from a 2 percent rise in December. Economists had predicted that inflation would remain stable at 2 percent.

The inflation rate was driven mainly by higher prices of automotive fuel which rose by 11.6 percent year-on-year. Most food products and non-alcoholic beverages also saw price-hikes by 3.5 percent on average, with the most significant increase in the prices of dairy products and vegetables. Yogurt prices increased by 8.5 percent, eggs by 5.1. Non-alcoholic beverages went up by 1.9 percent. Meanwhile, price growth in alcoholic beverages and tobacco slowed.

Prices in restaurants and cafes increased by almost 7 percent, which owners say is to make up for the costly introduction of electronic cash registers which they are obliged to have under a new legislation.

January’s inflation figure is now above the Czech National Bank’s inflation target rate of 2 percent, a sign that the end of forex interventions may not be far off. The forex interventions were launched in November 2013 as an instrument for maintaining monetary stability. Their aim was to keep the crown's rate below 27 crowns to the euro. According to an earlier statement by National Bank Governor Jiří Rusnok the forex interventions could end in mid-2017.