The CPI went up from 5.9% y/y in March to 6.1% in April, as it rose by 0.9% on month. The market was looking for 5.7% y/y. The central bank’s warning of inflationary pressures from last Monday were thus confirmed quite early. The bad surprise was first of all caused by food prices, which rose by 0.9%. Their y/y pace went up from 7.2% in March to 7.6% in April. Although this increase could be explained by seasonal increase of fruit and vegetables, the other components of the CPI basket show, that the upbeat domestic consumption start to take its toll. The seasonal increase of clothing prices has been stronger than last year (+3.1%), taking March and April together. Alco-holic beverage prices accelerated as well. Catering prices, which reflect primarily domestic factors, also went up.
On the other hand, fuel prices did not surprise and their 4% m/m rise can be assessed as rather moderate, given the devel-opment of crude oil prices. The y/y pace was unchanged or lower in the categories like education, leisure, telecommunica-tions and health.
It had been expected before that the CPI would steadily decline in the first half of the year due to favorable comparative bases last year and that the decisive period for meeting the inflation target would be the second half of the year. Today’s figures, however, represent a significant disturbance of this plan. They signals that problems may arise even sooner. Given the central banker’s warning of last week, the danger of an rate hike in-creased. We expect negative reaction of the bond market.
(Jakub Dvorak, CSOB Investment Research)