CZECHIA: Headline Inflation Expected to Moderate Further in June

June inflation data is on the docket tomorrow morning (08:00BST/09:00CET), where the headline figure is seen moderating from +2.6% Y/Y in May to +2.4%. The CNB opted for an above-consensus 50bp rate cut last month, but stressed that “no further major rate cuts should be expected” as “the Bank Board sees inflationary risks in the outlook.”

• Goldman Sachs forecast headline inflation to fall to 2.2% y/y. They note that Czechia’s largest utility company cut electricity prices by 17% in June, with other utility companies following suit, and estimate the impact of the price cut to be -0.39bps on month-on-month inflation. Looking ahead, Goldman Sachs expect external factors (the strengthening in the Czech NEER over the past 18 months, low global gas and food prices) to continue to drive inflation lower in the remainder of the year.
• UniCredit say consumer prices likely rose 0.2% m/m in June, likely driven by a seasonal increase in package holiday prices. Such a month-on-month rise would slow year-on-year inflation to 2.4%. Looking beyond June, UniCredit do not see much space for inflation to ease further. They think inflation will hover above, rather than below, 2.5% for most of 2H24 and could breach 3% temporarily at the end of this year due to base effects, before easing to 2.6% by the end of 2025.