The consumer price index increased by 0.3% in February and the inflation rate thus remained at 7.5% y/y, which is the same value as in January. The growth in the overall price level was supported by the tail end of price hikes in rental rates and the seasonally higher holiday prices. Going against such increases, we saw the prices for food declining and a temporary decrease in the price of oil allowed for at least a temporary drop in fuel prices.
The key question is whether the Czech National Bank (CNB) will raise interest rates once more in its fight against inflation or will it wait to see how its recently adopted measures act as they take effect on the economy along with the strong CZK exchange rate. GDP figures have confirmed a widening of the gap between the actual and long-term sustainable non-inflationary potential of the economy. We can also see doubts about the secondary impacts of the actual inflation shock. Requests for faster growth in wages and an additional to the valorisation of pensions are examples of such secondary effects. The strengthening of the CZK exchange rate, which is not warranted by the fundaments, would argue against higher rates.