What are the main reasons for inflation so far?
The current slight decline in inflation is only temporary. Inflationary pressures in the domestic economy will increase, companies have already said that the situation is the same, if not worse than before the pandemic, there is a shortage of labor on the market. The pressure for faster wage growth will increase, which will also be reflected in consumer prices. Even earlier, however, inflation from abroad will reach us in the form of rapidly rising commodity and material prices. After all, the industrial producer price index rose to 4.6 percent in the Czech Republic, and even more abroad. This pressure on producer prices will intensify.
Which consequences of rising prices are among the most significant?
It is mainly about the prices of materials and commodities on world markets, which are rising by tens of percent. Sometimes even by multiples.
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Will central bankers raise interest rates at their next meeting? Or will it delay this move with inflation rising more slowly than expected?
It won’t back off. Inflation is currently on a trajectory that corresponds to the Czech National Bank’s forecast. The trajectory would therefore correspond to a rapid increase in interest rates, which should begin this month, continue in August and then again in the autumn. That is what the CNB model says. If inflation is in line with this model, the Bank Board should decide accordingly.
So will banks make mortgages and other financial products more expensive?
Banks are already perceiving the situation and already include raising CNB rates in the currently offered interest rates. So right after the expected tightening of monetary policy, nothing dramatic will come. Mortgage rates have already risen. Tightening is planned. I do not expect bankers to take stronger steps to curb inflation, standard instruments – interest rates – will suffice.
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What kind of inflation do you expect and what will affect it the most?
There is a higher risk that inflation will be skewed upwards than downwards. There is a risk that inflation will continue to accelerate in the coming months, hovering between three and four percent, or worse, higher. But the fluctuation will only be temporary. Industrial products will be the most expensive, with rising commodity prices in the world. Furthermore, energy, oil and gas prices are rising sharply. Currently, I can’t think of any category that should be repeatedly cheaper, the pressures on price growth are clear.
Which sectors are among the most endangered, which, on the contrary, benefit from the situation?
We are a small open economy that is basically taking over prices from the world. So everyone who is dependent on the import of materials from the world must feel the pressure on their own margins. It will only get worse. Conversely, those who are satisfied with domestic labor and materials may be in a better situation. For example, the services sector is less exposed to commodity price fluctuations than industry or construction, where price increases are much more pronounced.
Inflation is here. The world lacks raw materials
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Lack of products and raw materials • VIDEO Videohub
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