Actual (July): -0.4% m/m; 0.3% y/y
Consensus: -0.1% m/m; 0.6% y/y
Previous (June): 0.0% m/m; 1.2% y/y
Consumer prices fell more than expected as food prices surprised by a steep decline. Lower gas prices for households also supported disinflation. Annual inflation dropped close to zero, however, the Czech Republic do not need to fear. A short period of deflation can not be ruled out; however, it would be short and mild without negative side effects.
The central bank should not be surprised with the inflation development. Increasing number of positive economic news abroad as well as some signs of easing recession grip in the Czech economy are likely to shift monetary policy to the sit-and-wait mode.