CPI Actual (May): 0.2% mom; 3.2% yoy
Consensus: 0.1% mom; 3.1% yoy
Actual (Apr): 0.0% mom; 3.5% yoy
Consumer prices slightly exceeded expectations, however, continuing disinflation in headline inflation and negative core inflation leave open the possibility of CNB’s rate cut at the end of June. In May, the price level of consumer basket was affected mainly by rising food prices (0.8% mom), higher regulated rents (1.7% mom) and delayed impact of higher excise rate on tobacco products (1.0% mom). On the other hand, fuel prices declined by 1.1% mom thanks to lower oil prices reflecting rising worries about the global economy and renewed stress in the Euro area. Headline inflation gets closer to the upper limit of the CNB’s tolerance band. Monetary-policy inflation (excluding impact of changes in indirect taxes) reached 2.0% yoy, exactly the value of the central bank’s target. Core inflation remains slightly negative and deflation lasts almost three years. Benign inflation environment together with weak domestic demand enables the central to think about more relaxed monetary policy. The CNB may cut interest rates already at the end of June.