Macroeconomic Forecast Czech Republic

May 2007 | Macroeconomic Forecasts

The Czech Consumer Price Index ticked up slightly in March by 0.4% m-o-m, which brought the annual inflation rate to 1.9% y-o-y, the highest inflation rate in six months but still below the Czech National Bank's (CNB) target inflation. While the CNB has an inflation target of 3.0%, it has a tolerance band of 1% on either side. According to the Czech Statistical Office , the monthly inflationary increase was driven largely by higher prices for tobacco products, which rose 3.3% m-o-m, as a result of a previous hike in excise duties, an increase of 9.6% y-o-y. The biggest y-o-y growth in consumer prices, however, was in water, electricity, and fuels, with the cost of water supply increasing by 6.4%, electricity by 7.9% and solid fuels by 15.4%. We forecast that inflation will come in at 3.1% y-o-y by end-2007, as low interest rates will continue to support high consumer demand.

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