Czech Republic: Inflation falls to lowest level in three years
June 10, 2013
In May, consumer prices dropped 0.2% over the previous month, which contrasts the 0.1% increase observed in the preceding month. The monthly drop mainly reflects lower prices for housing, water, electricity gas and other fuels, particularly for natural gas, which declined 6.2% over the previous month.
As a result of the May reading, annual headline inflation fell from 1.7% in April to 1.3% in May, which represents the lowest level since June 2010. In addition, the decline exceeded both market expectations and the Central Bank's estimate, which had inflation inching down to 1.6%. However, inflation remains within the Central Bank's target of 2.0% with a tolerance margin of plus/minus 1.0 percentage points.
The Czech National Bank revised its inflation expectation for this year and expects annual consumer prices to end the year at 1.8% (previously: 2.3%), before picking up to 2.0% by the end of 2014 (previously: 1.8%). FocusEconomics Consensus Forecast panellists share the Bank's assessment and also expect inflation to reach 2.3% by the end of this year, which is down 0.1 percentage points from last month's Consensus. For 2014, panellists expect inflation to fall to 1.8%.
Author: Ricardo Aceves, Senior Economist