According to the CZSO, inflation rose to 6.6 percent in December from six percent in November. The last such high rise in prices was in September 2008.
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Inflation was one percentage point higher than the CNB estimated in its November forecast. According to the King, the reason is, as in October and November, accelerating core inflation and growth in rents, said the King.
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In the January forecast, he estimates that year-on-year growth in consumer prices will be around nine percent in the first month of this year.
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“At the same time, this estimate is surrounded by a high degree of uncertainty, as the usual revaluation of goods and services may lead to an even higher rise in the price level at the beginning of this year due to the overall pro-inflation macroeconomic climate. It cannot be completely ruled out that inflation will reach double-digit levels for several months later this year, ”added Král.
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Inflation in the Czech Republic last reached a double-digit level in 1998, when it was 10.7 percent.
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End of VAT remission on energy
According to the King, the fact that regulated prices will start to grow strongly year-on-year starting in January will contribute to the increase in inflation. “This will be due to the increase in housing-related energy prices after the temporary waiver of VAT on electricity and gas came to an end in January. This has so far reduced headline inflation by about one percentage point,” said King.
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The year-on-year rise in fuel prices was even higher year on year in December, compared with the CNB’s estimates. In December, regulated prices fell overall year on year, due to the temporary waiver of VAT on electricity and natural gas. However, according to the King, the decline was smaller than the central bank expected in the forecast.
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According to the King, core inflation, ie inflation excluding seasonal effects, regulated prices, tax adjustments and other administrative measures, will reach very high levels for some time to come. It will thus reflect domestic demand pressures as well as strong dynamics of producer prices at home and abroad.
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According to the King, food prices will also rise in connection with the growth of agricultural commodity prices on world markets. “Inflation will thus culminate in the coming months. Eventually, overall inflationary pressures will begin to ease. This will be helped by a slowdown in import prices, supported by the strengthening koruna, and the ongoing sharp rise in interest rates by the Czech National Bank will push down the gradual decline in inflation. “said the King.
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