Czech Republic: Inflation reaches lowest level in over four years
February 12, 2014
Consumer prices rose 0.1% over the previous month in January, which came in below the 0.4% rise observed in December. According to the statistical office, the monthly increase reflects that lower prices for housing, water, electricity gas and other fuels offset higher prices for food and non-alcoholic beverages.
Annual headline inflation fell sharply from 1.4% in December to 0.2% in January, which marked the lowest rate since October 2009. The lower rate in January mainly reflects a base effect, as the government decided to raise the VAT tax in January 2013. As a result, inflation fell below the Czech National Bank's (CNB) target range of 1.0% to 3.0%. In addition, the reading fell short of the 0.4% rate the market had expected.
According to its November Inflation Report, the CNB expects inflation to end 2014 at 1.2%. For 2015, the Bank expects inflation to rise to 1.9%. FocusEconomics Consensus Forecast panelists expect inflation to reach 1.6% by the end of 2014, which is unchanged from last month's Consensus. For 2015, panelists expect inflation to rise to 2.0%.