Consumer prices index rose 0.1%, month-on-month, and 4.1%, year-on-year, in December. The index of net inflation increased by 0.2%, m-o-m, and 2.4%, y-o-y. December CPI figures are slightly higher than our forecast and market expectations. We can identify two main forces influencing general price level in December: gasoline prices and food prices. While a steep decline of gasoline prices could be anticipated, an increase of food prices is higher than expected. The headline CPI rose dramatically in June and July, then the trend reversed and inflation began to fall. Finally, at the end of the year the value of y-o-y CPI change is almost the same as in December 2000. Thus, CNB has reached its inflation target for the first time since the inflation targeting was introduced in the Czech Republic.
(David Marek)