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CZECHIA: Inflation Expected To Have Accelerated Beyond CNB's Tolerance Zone

CZECHIA
EM BulletBulletEmerging Market NewsCentral and Eastern EuropeCzechia

Czechia's headline inflation may have accelerated to +3.3% Y/Y in December according to the median estimate in a Bloomberg survey, exceeding the +/-1pp tolerance zone around the CNB's +2.0% Y/Y target, with sell-side desks pointing to base effects. The CZSO will release the data at 08:00GMT/09:00CET, with the central bank set to release its comments (including a breakdown of the data) at 12:00GMT/13:00CET. The CNB's forecast (+3.3% Y/Y) aligns with consensus.

  • Goldman Sachs project an increase in headline inflation to +3.3% Y/Y from +2.8% prior. In their view, the "rise is entirely due to base effects, given the sharp decline in inflation in December last year (driven by a reduction of the VAT rate on some food items)." They flag services inflation as a point of interest, due to CNB communique naming it as a reason behind the pause in its easing cycle. Goldman "expect sequential services inflation to continue its gradual descent (which has been underway since September)."
  • ING believe that inflation likely accelerated and exceeded the +3% Y/Y upper bound of the CNB's tolerance band, "driven by more substantial annual food price growth and a softer annual price decline of fuel." They note that the annual dynamic in both categories was likely boosted by base effects. Meanwhile, "core inflation is estimated to have remained unchanged in December, while price growth in the regulated segment has softened only slightly."
  • JP Morgan expect headline inflation to print at +3.4% Y/Y on the back of base effects. They note that "a very favourable food CPI reading in December 2023 will roll off from the 12-month change, triggering a pick up in food inflation from 0.9% Y/Y to 3.1%." In addition, they "expect rents to continue trending higher to 1.9% Y/Y (from 1.5%), but core is likely to be flat at 2.3%."
  • Komercni banka see headline inflation at +3.3% Y/Y but also note that it should return to the tolerance band in January. In their view, "the increase in inflation was mainly due to the continued increase in food prices, the annual price increase of which was also amplified by the low comparative base from the end of 2023." However, "core inflation in month-on-month seasonally adjusted terms was slightly above 0.1%, similar to November, which contributed to the slowdown in its year-on-year dynamics from 2.3% to 2.2% in December."
  • As a reminder, from this month onwards the CZSO will start publishing flash inflation prints followed by revised final readings every month. This means that the CNB will have access to preliminary inflation data for January when the Bank Board holds its next monetary policy meeting next month.
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Czechia's headline inflation may have accelerated to +3.3% Y/Y in December according to the median estimate in a Bloomberg survey, exceeding the +/-1pp tolerance zone around the CNB's +2.0% Y/Y target, with sell-side desks pointing to base effects. The CZSO will release the data at 08:00GMT/09:00CET, with the central bank set to release its comments (including a breakdown of the data) at 12:00GMT/13:00CET. The CNB's forecast (+3.3% Y/Y) aligns with consensus.

  • Goldman Sachs project an increase in headline inflation to +3.3% Y/Y from +2.8% prior. In their view, the "rise is entirely due to base effects, given the sharp decline in inflation in December last year (driven by a reduction of the VAT rate on some food items)." They flag services inflation as a point of interest, due to CNB communique naming it as a reason behind the pause in its easing cycle. Goldman "expect sequential services inflation to continue its gradual descent (which has been underway since September)."
  • ING believe that inflation likely accelerated and exceeded the +3% Y/Y upper bound of the CNB's tolerance band, "driven by more substantial annual food price growth and a softer annual price decline of fuel." They note that the annual dynamic in both categories was likely boosted by base effects. Meanwhile, "core inflation is estimated to have remained unchanged in December, while price growth in the regulated segment has softened only slightly."
  • JP Morgan expect headline inflation to print at +3.4% Y/Y on the back of base effects. They note that "a very favourable food CPI reading in December 2023 will roll off from the 12-month change, triggering a pick up in food inflation from 0.9% Y/Y to 3.1%." In addition, they "expect rents to continue trending higher to 1.9% Y/Y (from 1.5%), but core is likely to be flat at 2.3%."
  • Komercni banka see headline inflation at +3.3% Y/Y but also note that it should return to the tolerance band in January. In their view, "the increase in inflation was mainly due to the continued increase in food prices, the annual price increase of which was also amplified by the low comparative base from the end of 2023." However, "core inflation in month-on-month seasonally adjusted terms was slightly above 0.1%, similar to November, which contributed to the slowdown in its year-on-year dynamics from 2.3% to 2.2% in December."
  • As a reminder, from this month onwards the CZSO will start publishing flash inflation prints followed by revised final readings every month. This means that the CNB will have access to preliminary inflation data for January when the Bank Board holds its next monetary policy meeting next month.