Czech Central Bank Says Inflation Slowdown Signals Lower Peak
Consumer prices rose 17.2% from a year ago, driven by higher electricity and natural gas costs, the Czech Statistics Office said.
(Bloomberg) -- Czech inflation unexpectedly slowed for the first time in more than a year and the central bank, which last month halted its aggressive interest-rate increases, said price growth may be peaking.
Consumer prices rose 17.2% from a year earlier, driven by higher costs of electricity and natural gas, the Czech Statistics Office said on Monday. The reading was below the central bank’s 19.3% projection for the month and also trailed the 17.7% median analyst estimate in a Bloomberg survey.
In the first rate meeting under new Governor Ales Michl, the central bank left borrowing costs unchanged after nine consecutive hikes. While the bank’s forecast sees the inflation rate rising to around 20% this year, Michl has said most of price drivers are external and rates are high enough to curb home-grown demand pressure.
- Power prices were 34.6% higher from the previous year, while natural gas rose 61.4%; declining costs of motor fuels were the main reason for the overall inflation slowdown, the statistics office said.
- The Czech National Bank said the August print was below its forecast mostly because of food prices and core inflation, which ran at 14.7%, compared with a 15.7% forecast.
- “The evolution of inflation during the summer signals the possibility of inflation peaking at a somewhat lower level than expected,” the bank said on its website.
- The next policy meeting is scheduled for Sept. 29.
- The yield on 5-year notes fell 16 basis points to 5.16%; the premium over German bunds of the same maturity shrank to 367 basis points, the lowest in 6 months.
- Forward-rate agreements tumbled, wiping out a roughly 50% chance of a hike later this year and bringing the expected start of policy easing forward to the first quarter of next year.
- Martin Gurtler at Komercni Banka said “it is possible that annual inflation has already peaked” as government plans to subsidize or cap energy prices, combined with declining consumer demand and base effects could further ease price growth.
- Jan Bures at CSOB said that inflation is likely to accelerate again in September when power and natural gas suppliers are expected to further increase prices.
- Still, “weaker inflation data will probably reinforce the dovish majority at the CNB,” he said in a note.
- Czech Central Banker Calls for Policy Caution as Spending Slows
- Michl Says Jackson Hole Showed Rates Alone Won’t Cure Inflation
- Czech Central Banker Zamrazilova Warns Against Large Wage Hikes
- Taming Czech Inflation Faster Would Hurt Economy Too Much: Frait
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