The consumer price index increased 0.9% in November, significantly exceeding the estimates. Year-on-year inflation moved up from 4% in October to 5% in November. This is the highest rate seen since August 2001, when the inflation rate reached 5.5%. Food products in particular and, to a lesser extent, also beer and fuel were behind the increase in consumers prices.
Although inflation in November moved to a relatively high level, the peak is yet to come. The inflation rate should break through 6% at the beginning of the next year. Fast economic growth, the falling unemployment rate and inflation well above the inflationary targets represent a very strong case for an increase in interest rates next year. However, there exists an unpleasant complication in the form of the very strong crown, which rose to new all-time highs in anticipation of further increases to interest rates. If the pressure from the crown strengthening abates, the CNB will have no reason to hesitate with the tightening of the monetary policy screws.