Czech Inflation Stays at 2.2% Y/Y in August, CPI Falls By 1.4%

Lower Fuel Prices Drive Dip in August, Inflation to Remain Stable

Key Points

• Czech inflation remained stable at 2.2% year-on-year in August
• Consumer Price Index (CPI) fell by 1.4% month-on-month, driven by lower fuel prices
• Inflation is expected to remain within the Czech National Bank's target range of 1-3% in the coming months

The Czech Statistical Office announced today that inflation in the country remained at 2.2% year-on-year in August, unchanged from the previous month. The Consumer Price Index (CPI), which measures the change in the prices of goods and services purchased by consumers, fell by 1.4% month-on-month.

The decrease in the CPI was primarily driven by a drop in fuel prices, which fell by 3.7% in August. This was partially offset by an increase in food prices, which rose by 0.3%. Core inflation, which excludes volatile items such as food and energy, remained stable at 1.9% year-on-year.

The Czech National Bank (CNB) has a target inflation rate of 2%, with a tolerance band of ±1%. Inflation has been below the target since the beginning of the year, and the CNB has been considering raising interest rates to bring it back within the target range.

However, the CNB has recently signaled that it is in no hurry to raise rates, as it believes that inflation will remain stable in the coming months. The bank's governor, Jiří Rusnok, said in a recent speech that the CNB is "monitoring the situation closely" and will "react if necessary."

Analysts expect inflation to remain within the CNB's target range in the coming months. However, there are some risks to this outlook, including the possibility of a resurgence of COVID-19 and a weaker global economy.