The January rise in consumer prices confirms that the Czech economy will face its highest ever monthly rise of inflation, and its highest rate of inflation since 1998.
According to analysts, year-on-year inflation is likely to exceed 10 percent in the coming months and will start to slow down significantly from the middle of the year. They estimate this year’s average inflation at about 9 percent.
Concerns about rising inflation expectations are likely to lead to an increase in the Czech National Bank’s interest rates after the national bank expected January inflation at 9.4 percent, i.e. half a percentage point lower than it actually was.
On Monday, the Czech Statistical Office announced that inflation in the Czech Republic accelerated to 9.9 percent year-on-year in January from 6.6 percent in December. Year-on-year consumer price inflation was the highest since July 1998, when it stood at 10.4 percent.
According to the statistical office, in a month-on-month comparison, consumer prices rose the most since January 1993. The rise in prices was due to higher housing prices and higher electricity costs. Compared to December, the price of electricity was up by almost 39 percent and natural gas by 31 percent.
According to analysts, January inflation is also very important from the point of view of the Czech National Bank’s new macroeconomic forecast, which expected consumer prices to rise by 9.4 percent year-on-year.
“Given that in January, inflation was above the forecast again, it cannot be ruled out that the bank will increase interest rates by 25 points in March,” said Miroslav Novák, an analyst at the Akcenta financial company.