Czech Republic: Inflation drops to seven-month low
August 9, 2012
In July, consumer prices dropped 0.1% over the previous month, which contrasted both the 0.2% increase observed in June and market expectations of a 0.1% rise. The monthly drop was the result of lower prices for food and non-alcoholic beverages as well as for clothing and footwear. As a result of the monthly decline, annual headline inflation fell from 3.5% in June to 3.1% in July, which marks the lowest level since December 2011. The reading undershot both market expectations and the Central Bank's estimate, which had inflation inching down to 3.4%. Nonetheless, at the current level inflation remains above the Central Bank's target of 2.0% (with a tolerance margin of plus/minus 1.0 percentage points). The Czech National Bank expects inflation to fall to 3.0% by the end of this year. For 2013, the Bank predicts inflation to fall further to 2.3%.
Author: Ricardo Aceves, Senior Economist