Komercni Banka Say Core Inflation May Have Eased To +7.1% Y/Y In July

The Czech Banking Association write that the acceleration in M/M price growth was "typical for July due to seasonal effects," while Y/Y inflation "remains at the lowest level since the end of 2021." The marginal beat in the M/M figure was largely due to an increase in the prices of holiday packages alongside upticks in fuel prices and rents. The CBA expect inflation to average around +11% Y/Y this year. They don't see it falling below +7% Y/Y and expect a slight uptick at the end of the year. They assess that the main risk is that inflation will not reach the 2-3% Y/Y level in the long term, but rather will stabilise at an elevated level. They believe that the further development of energy prices in the context of the war in Ukraine will be key.

• Komercni banka agree that the acceleration in M/M price growth was due to the seasonal increase in holiday prices and more expensive fuel and higher rents. They think that core inflation was likely higher than their initial forecast (+6.7% Y/Y) and now say that if may have cooled to +7.1% in July from +7.5% recorded in June. They expect headline inflation to average at +11% Y/Y this year and slow to +1.3% next year. They see headline inflation slowing to around +7% in September, but note that it may temporarily accelerate to +9% in October, before falling again. They note that "the timing of the long-awaited significant reduction in energy prices and capturing it in the price statistics of the CZSO is associated with a large degree of uncertainty."