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Czech inflation decelerates amid lower food prices – ING

Jakub Seidler, Chief Economist at ING, notes that Czech inflation decelerated to 2.3% in July from 2.6% in the previous month, driven mainly by lower food prices but core inflation accelerated further.

Key Quotes

“The July CPI decelerated to 2.3% from 2.6%, as expected, mainly on the back of lower food prices, which declined by 1.9% month-on-month (MoM). Food prices year-on-year (YoY) fell 0.1% in July after rising 2.7% YoY in June.”

“Though inflation came in below the Czech National Bank forecast of 2.6%, it is not a game-changer for the bank’s latest monetary policy outlook. Indeed, the CNB confirmed last week that its July CPI did not incorporate the latest food prices survey.”

“Given the current favourable economic conditions, pro-inflationary risks stemming from an overheated labour market, a still relatively weak Czech koruna and recent CNB forecast indicating the need for further monetary tightening, we believe that one more rate hike this year is a done deal.”

“If the koruna’s appreciation remains muted, we could even see two hikes by the end of the year.”

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