Czech Inflation April 2008

The Czech Republic's April inflation rate fell less than economists forecast, raising the prospect that the central bank will hold off on cutting interest rates in the near future. The inflation rate dropped to 6.8 percent from 7.1 percent in March and a near decade-high of 7.5 percent in February, the Prague-based statistics office said today. The central bank forercast was for a rate of 6.7 percent. Consumer prices rose 0.4 percent in the month, following a 0.1 percent drop in March.




Housing costs were 0.6 percent higher than in March, led by a 2.9 percent increase in natural gas prices for households. Prices of food increased half a percent from March, following two months of a decline, and were 9.6 percent higher compared with March last year.

The inflation rate has exceeded Ceska Narodni Banka's 4 percent ceiling since last November, driven by global increases in food and fuel costs and government spending measures that are beyond the bank's direct influence.

The Czech central bank said today in a statement posted on its Web site that inflation has passed its peak and its expects price growth to return to ``low levels corresponding to its targets at the end of 2008 and the beginning of 2009.''

However the bank did say the reading exceeded its forecast as a result of higher-than-expected adjusted inflation without fuels which "could signal continuing inflationary pressures from the domestic economy."

The central has relied on the koruna's 12 percent gain against the euro in the past 12 months, slowing economic growth and the mitigating effect of regulated price growth to curb inflation to 2.9 percent in the first quarter and to 2.2 percent in the third quarter of 2009.

The Czech National Bank left its benchmark interest rate unchanged at 3.75 percent for a second consecutive meeting last week continuing to bank on the impact of a strong koruna and a developing economic slowdown to damp inflation.