The Czech industrial producer price index fell by 0.1 percent in December causing the year-on-year inflation rate to decline to 5.3 percent from 5.4 percent in November. Prices in the agricultural sector rose 1.7 percent in December with the y/y inflation reaching 26.6 percent.
Under different conditions, the surprisingly low level of the industrial producer price index could perhaps dampen fears of inflation and related interest rates hikes. However, in the current situation of a tight labor market and with the influence of the one-off inflationary shock on the expectation of inflation, the future development is quite clear: the interest rates are bound to go up regardless of the lower industrial prices. Moreover, agricultural prices suggest caution – the increase in food prices is probably not over yet.