Actual (Nov): 0.4 % m/m, 2.5 % y/y
Consensus: 0.2 % m/m, 2.3 % y/y
Previous (Oct): 0.3 % m/m, 2.3 % y/y
The inflation figures are higher than expected. Consumer prices accelerated in November mostly due to food and housing. Food prices increased by 1.6 pct month-on-month, while housing costs by 0.6 pct. There was an influence of a hike in (regulated) price of natural gas. On the other side we can see a minor effect of culture and holidays, telecommunications and household equipment. Prices in these areas have decreased.
month inflation should remain on the current level. At the beginning of next year it will be pushed even higher by tax hikes and deregulation and will likely get above 3.5 pct. The headline figure stays above the CNB target (2 pct). However, due to the significant impact of food prices, core inflation stays low. In November it was still slightly negative.
Demand-driven inflation pressures remain minimal and let the central bank keep interest rates low. The economic outlook is worsening and would even justify a rate cut. On the other hand, the bankers may see a risk for inflation expectations coming from food prices, tax hikes and the weakening koruna. Because of this dilema, we still expect the rates to stay stable.