Analysts: year-on-year inflation probably peaked in May

Year-on-year inflation likely peaked at 3.2 percent in May due to the low base effect from last year, according to a poll of analysts conducted by ČTK. It should remain near the Czech National Bank target of 3 percent, they said.

“The annual rise in consumer inflation in May was due to significantly more expensive fuels, which amplifies the effect of a very low base effect from last year. The alcoholic beverages and tobacco segment also made a significant contribution to inflation in April,” said Akcenta analyst Miroslav Novák, predicting annual inflation will peak in the second quarter and slow slightly in the coming months.

“Consumer prices in April surprised with brisk growth of 3.1 percent year on year, driven mainly by higher prices in the transport category and also higher prices of tobacco and alcohol. We expect inflation to peak in May and reach 3.3 percent year on year,” said Raiffeisenbank analyst Vít Hradil. “The effect of low price base commodities strengthened compared to April.”

Komerční banka economist Michal Brožka notes there was a further loosening in May, which may have a significant impact on the development of the price level. “In that case, year-on-year inflation could fall slightly in June, but still remain close to three percent in the second half of the year,” he said, adding that the result of inflation in May could provide important guidance on whether the Czech National Bank raises interest rates in June.

According to UniCredit Bank analyst Patrik Rožumberský, the acceleration of year-on-year inflation has apparently stopped after the unexpectedly high April jump. The rise in fuel prices, supported by a low base, continued to contribute to higher inflation, he said, estimating May inflation at 3.1 percent.