Home » Business » Global Inflation Trends and the Impact on the Czech Economy

Global Inflation Trends and the Impact on the Czech Economy

Average⁤ global year-on-year‌ inflation ‍calculated by Bloomberg reached⁣ a cyclical ⁢high in November ⁣last⁤ year ⁤at‍ 10.4 ​percent. Since​ then, this‌ widely⁣ watched⁤ global ‍inflation indicator has gradually declined ‍and is currently ⁢at 6.5 percent.⁢ However,​ it⁤ is important​ to⁣ note that⁢ the decrease in ⁣overall inflation‍ was‍ primarily⁢ caused⁣ by ⁤a significant⁢ drop in energy ⁤prices, such as the price ‌of⁣ Brent‌ crude ⁣oil,​ which‍ has fallen by⁤ a massive‍ 25 ⁢percent since November ​last⁣ year.

Fundamental ‍demand-driven ⁢inflation pressures⁤ in the ‌economy are better monitored through core⁢ inflation, which ⁢excludes ⁣volatile energy ​and ⁢food‌ prices.

The ⁤following​ graph‌ illustrates⁣ the development of core ⁣inflation in key⁣ economies ‌and the Czech ‌Republic. (Source:⁢ Bloomberg, Conseq ⁢modification)

It‌ is evident that‍ China is the ‌only⁤ country⁤ currently⁤ not facing⁣ inflationary ⁣pressures, with‍ Chinese ‌core⁣ inflation reaching just 0.6 percent‌ in​ May.⁤ In ‍all‌ other​ economies,​ core inflation is‌ more‍ or​ less​ above​ the ⁢central banks’ ​two percent‍ inflation⁤ targets ⁤and​ is ⁣already⁤ a problem in⁢ Japan, where it reached 2.6 ⁣percent⁤ in May.

Notice the ⁤clear upward​ trend since​ the ⁢beginning ⁣of‍ last ​year. ⁣Core inflation⁢ in the United States and the ⁤eurozone​ stood⁢ at 5.3 percent.​ Looking ‌at ‌the⁤ inflation curves of these two economies, it⁣ is clear that the process ​of disinflation, ⁢or declining ​inflation rates, has not even ‌begun.

Among the countries ‍analyzed, the ​Czech Republic is clearly‌ the worst‍ off, with core ‌inflation reaching 10.3⁢ percent⁣ in ‍May,⁢ with a peak ⁣of 14⁢ percent in ‌October last⁢ year.

What’s next?

If ‌energy prices‌ were to ‍rise ⁤again in the​ coming ‌period,⁢ which ‌cannot ​be⁣ ruled‌ out, overall​ inflation⁢ would have ⁢a ​strong ‍tendency⁢ to accelerate across the‌ global economy.

Central‌ bankers are⁢ therefore somewhat​ cornered at⁣ the moment. ​It is ⁢likely that​ they will ⁣have⁤ to ⁣further ⁢increase ⁤interest ⁢rates, which‍ will‌ negatively impact‍ economic ‌growth ⁣dynamics and ⁢could also bring ⁤further​ problems⁢ in terms ⁢of⁣ financial stability. ⁣Therefore,‌ let’s ⁢prepare for⁤ the ‍fact‍ that‌ inflation will⁢ not return⁤ to the ‍two ⁢percent inflation targets and will instead settle ⁢significantly higher, ⁢around five percent, ​in ⁤the ⁤medium⁣ term.

Four ​pro-inflationary factors

From ​a global ⁤perspective,⁤ there are ⁣also ‌several‍ current‌ long-term ⁢secular pro-inflationary factors ⁢that‍ significantly exceed central​ banks’ ⁤inflation ‌targets.

The ​first is deglobalization,⁢ or ⁤the tendency to ​shorten supply ⁣chains. In ‌other words,​ industrial ⁣production ⁣now has⁤ a tendency to move ⁣at ⁣least‍ to some ‍extent from ‌cheap Asian ‌economies ⁤back⁢ to Europe and⁢ North America, which ​have ⁣significantly⁤ higher ⁤production costs.

The ‍second factor‌ is demographic trends, where ⁣the​ population has ‍a ⁢strong​ tendency ⁣to age, and ⁤there is also a significant decline⁣ in​ the ‍absolute⁤ number of⁤ working-age population. ⁣This​ factor creates strong ⁢pressures⁤ on ‌nominal⁤ wage growth​ in ⁤the labor ⁣market, ‌which ⁣strongly supports ⁣increased inflation.

The ‌third secular⁤ pro-inflationary factor is the ​peak ‍of cheap ‌energy,‌ a ⁢term coined ⁣by the⁢ phenomenal American​ macroeconomic‌ analyst Luke‍ Gromen.

Michal Stupavský

He studied finance ​and​ business​ valuation⁢ at the University ‌of⁢ Economics⁣ in ⁤Prague and holds the ​CFA ​designation. ​He is ‍a⁢ co-author of ‌the first⁤ Czech book on behavioral ‍finance,⁣ Investor of the⁤ 21st Century. ‍From‍ 2009 to 2012,‍ he worked‌ at Conseq Investment Management⁣ as⁣ a portfolio ⁤manager⁤ of an ⁣equity ‌fund⁢ focused on ‌Central and Eastern European markets. He ⁢then ⁢worked at Unipetrol ‍as ​a manager.se‌ setkáváme⁢ v⁢ souvislosti​ s⁤ postupným vyčerpáváním⁣ levných ⁢zdrojů energie, jako je ropa‍ a‌ zemní⁢ plyn. S ​rostoucí poptávkou ​po⁢ energii ⁤a ⁣omezenými zdroji⁣ se očekává, ​že ⁣ceny energie budou⁢ nadále‌ stoupat, což bude mít vliv na celkovou‌ inflaci.

Posledním⁤ faktorem⁢ je⁢ monetární⁤ politika⁤ centrálních bank. V⁤ reakci​ na⁣ pandemii ​COVID-19⁣ centrální banky​ zavedly‍ mimořádná ​opatření, jako​ je snížení​ úrokových⁢ sazeb a nákupy ⁢aktiv,‍ aby ⁢podpořily ekonomiku.‍ Tyto ⁤kroky ‍však mohou také‍ přispět k inflaci,​ zejména ​pokud se ‍ekonomika začne zotavovat​ rychleji, ​než ⁣se očekávalo.

Vzhledem⁤ k těmto‍ faktorům⁢ je ⁢pravděpodobné, ⁣že⁢ inflace zůstane ⁢výrazně⁣ vyšší‍ než dvouprocentní cíle⁣ centrálních bank. To bude‌ mít‌ dopad⁤ na‍ ekonomický růst⁣ a finanční ​stabilitu.⁤ Centrální ‌banky budou ⁢pravděpodobně muset zvýšit⁤ úrokové sazby, aby omezily⁣ inflační​ tlaky, což ⁣může mít⁤ negativní ‌dopad⁤ na ekonomiku.

Je důležité, ⁣aby vlády a ‍centrální ⁤banky přijaly opatření⁢ k řízení ‌inflace ​a ⁣minimalizaci ‍jejích​ negativních⁣ dopadů. To může zahrnovat⁢ regulaci ‌cen ⁤energie, ​podporu ⁤inovací a investic⁢ do ⁣obnovitelných ⁣zdrojů⁤ energie,‍ podporu produktivity a zvyšování ​kvalifikace pracovní síly⁣ a ⁣monitorování a přizpůsobování monetární ​politiky.

Celosvětová‌ inflace je výzvou, kterou⁣ je třeba⁤ řešit s⁣ cílem udržet ekonomickou stabilitu⁢ a udržitelný růst. Je ⁢důležité,​ aby⁢ vlády, ⁤centrální banky⁢ a další ekonomické ⁤subjekty spolupracovaly a‌ přijaly opatření k ‌řízení inflace a ⁤minimalizaci‍ jejích ‍negativních dopadů⁣ na​ ekonomiku a občany.
detail​ photograph

How does ‍core ⁣inflation compare ​among‌ key economies​ and ‌the Czech⁢ Republic, ‍and what implications does this‌ have for ⁤central banks

Global year-on-year ⁣inflation, as​ calculated by Bloomberg, reached a peak in November last year⁢ at⁣ 10.4 percent. ⁢However,⁢ since then it has ⁤gradually declined and currently stands ⁢at 6.5 percent. This decrease in‍ overall inflation is ‍primarily due to a significant drop in⁢ energy⁤ prices,‌ such‍ as ⁣Brent crude oil, which has fallen by ‌25⁤ percent since November ⁣last year.


When monitoring⁢ fundamental demand-driven inflation⁣ pressures in the ​economy,⁣ it​ is better to‌ focus on core inflation, which excludes ‍volatile energy and food prices.

Looking⁣ at core inflation⁣ in key economies ⁤and the⁤ Czech ⁢Republic, it is⁤ evident that China is the only ⁢country​ currently not facing inflationary pressures, with ‍core ​inflation⁢ reaching just 0.6 percent in ⁣May. ⁣In⁢ all other economies, core ‌inflation is more or ‌less ‌above the ⁣central banks’ ‍two percent inflation targets and is ⁣already a problem in ⁤Japan, where it reached ⁣2.6⁢ percent⁤ in ​May.



The graph provided ‌in the article shows a ⁣clear​ upward trend in core ‍inflation since the beginning‍ of⁣ last year. Core inflation in the United ‌States ⁢and ‌the ⁣eurozone stood at‍ 5.3 percent. It‌ is clear from the inflation curves ​of these two‌ economies that‍ the process of disinflation has not even‍ begun.




Among⁣ the countries⁤ analyzed, the Czech Republic has the⁢ highest⁤ core inflation, reaching ​10.3 percent ⁤in May with a peak of 14 ​percent in October last⁤ year.

If energy ⁤prices were‍ to⁢ rise ‍again in the coming period, overall inflation would have a strong tendency to accelerate across the​ global economy. This puts ‌central bankers in ⁤a difficult position, as‍ they may have‌ to further ⁣increase​ interest rates, ⁤which could negatively impact economic growth and financial stability. Therefore,⁢ it is likely⁣ that inflation will not ⁤return ⁢to the⁤ central banks’ two percent inflation ⁤targets and instead ⁣settle significantly ⁢higher, ‌around ‍five percent, in the⁤ medium term.


From‍ a global⁢ perspective, there are several long-term secular pro-inflationary ‌factors that exceed central banks’ inflation targets. ⁤These include ​deglobalization, demographic trends, and⁤ the peak of cheap energy.

Overall, ​the article suggests ​that inflation ​is ⁣likely​ to remain higher than ⁣desired and that central banks may ‌face challenges in⁢ controlling it.

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.