The Czech Republic’s inflation rate has dropped below 10% for the first time since January 2022, according to analysts. The pace of consumer price growth slowed in June, attributed to lower demand and the strength of the koruna currency. The comparative base effect from last year also contributed to the decrease in inflation. In May, inflation stood at 11.1%. The Czech Statistical Office (ČSÚ) will release data on June’s inflation later this week.

Analysts at Raiffeisenbank estimate that the year-on-year inflation for June will be around 9.7%. They attribute the deflationary trend primarily to the decrease in fuel prices, which were more than 20% lower compared to the previous year. This is due to the high comparative base from last year when fuel prices reached their historical peak during the summer. Regulated prices are expected to decline further due to lower electricity and gas prices on the stock exchange and the impact of government regulations. However, analysts note that food prices continue to contribute to elevated inflation.

In June, there was likely a slight increase in food prices compared to May, and with the arrival of the tourist season, prices for recreation are also expected to rise. Prices for food services, accommodation, clothing, and footwear are likely to continue their upward trend. On the other hand, there could be some moderation in the housing category, with a slight drop in prices. Fuel and household equipment prices are expected to remain stable, having a neutral impact on inflation. Vít Hradil, the chief economist of Cyrrus, suggests that the price level rose by 0.4% compared to May, indicating a year-on-year inflation rate of 9.8%.

According to analysts at Česká spořitelna, the year-on-year inflation in June was 9.8%. Alongside the impact of the comparative base, several deflationary factors are at play, including decreased household consumption, declining energy, fuel, and real estate prices. The strength of the koruna is also dampening inflation. While the growth in food prices is milder, there remains significant uncertainty about their future trajectory.

Analysts at Česká spořitelna anticipate further easing of inflation in the coming months. They project that it will drop to 8.6% in July and 8.2% in August, with the pace of price growth reaching around 3% at the beginning of next year.

The dip below 10% in the Czech Republic’s inflation rate is a positive sign for the country’s economy and its citizens. It is hoped that this downward trend will continue in the coming months, providing relief to consumers and businesses alike.

Article by Prague Forum