Consumer prices stagnated in September and y-to-y inflation thus stabilized at 4.1%. While food and transport prices were growing by 0.3% and 0.5% m-to-m respectively, volatile prices of "leisure group" fell by 3% on back on discount holiday sales.
Prices included in the "net inflation" basket, targeted by the Czech National Bank, even fell by 0.1% m-to-m in September. Nevertheless, the annual net inflation managed to grow to 3.2% y-to-y. It is a shade below the CNB inflation target for the year end of 2000.
Inflation developments surprised the market, as the consensus expectations of both consumer and net inflation was a 0.2% growth, m-to-m. Inflation remains subdued in the Czech economy and once the pressure from expensive oil vanishes, the inflation indices fell back. It appears now that the inflation will fell well below the 4% y-to-y level by the end of this year and the net inflation will end the year substantially below the CNB's target (3.5 - 5.5%). Any interest rate cuts are thus rather distant…