Consumer prices rose by 0.5% m/m in April, or 3.0% y/y, down from 3.3 % y/y in March. The result met the market consensus; the inflation keeps on falling along the expected path. The bottom should be reached in May, we believe that the y/y figure will not be higher than 2.5% y/y.
The development of particular components confirmed, that inflationary pressures are still nonexistent. As expected, the prices in transportation went up due to a 3.1% rise in car fuel prices. On the other hand, prices of housing significantly slowed down. Also the slowing pace of household goods and maintenance prices confirmed that despite the steadily acceler-ating consumer demand, prices remained under pressure. The another significantly decelerating item were the food prices. The usual seasonal increase of fruit and vegetable prices was muted by falling prices of other foodstuffs, for example by prices of meat. Additionally, the seasonal increase itself has been so far weaker than in previous years.
Although the inflation falls deeper and deeper, the central bank currently pays more attention to different indicators when de-ciding on rates. One must also take into account the maneu-vering of the MPC in its struggle with the government. If the central bank cuts rates already in May, it will be first of all the result of the government pressure. Nevertheless, the cut should surely materialize until the end of June.
Jakub Dvorak, CSOB Investment Research