Credit: REUTERS/David W CernyJan 11 (Reuters) - Czech headline inflation unexpectedly slowed in December, helped by a year-end drop in fuel prices, data showed on Wednesday, backing policymakers seeking stable interest rates even as prices keep rising at a double-digit clip.
Consumer prices were steady on the month while the year-on-year inflation rate eased to 15.8%, from 16.2%, the statistics office said. Analysts had expected a pick-up to 16.4%.
Czech central bankers, like peers around central Europe, expect inflation to accelerate again at the start of 2023 and are watching companies' repricing in January, but they also bet on prices cooling off later in the year.
The average inflation rate in 2022 was 15.1%, the second highest level on record after 20.8% in 1993.
Soaring costs are a main factor behind falling consumer demand that has pushed the economy into a likely recession.
Central European policymakers have kept rates steady in recent months after launching aggressive tightening cycles already in 2021. Romania delivered what could be the region's final rate hike on Tuesday.
The Czech National Bank has held its base rate CZCBIR=ECI stable at 7.00% at its past four meetings but has not taken another hike off the table. Analysts forecast stable policy in the first half of the year.
"We continue to expect the first rate cuts in August this year," Erste Group Bank said, adding there were risks of a possible later start to loosening this year.
Czech central bank Governor Ales Michl has said inflation could pick up again to near 20% in January and February because of energy prices, but that it would slow quickly from the spring and fall below 10% in the second half of 2023.
A trio of rate setters at the bank's December meeting said a significant rise in prices in January would justify a rate increase.
One of those rate setters, Vice-Governor Eva Zamrazilova, said on Tuesday that a further rate raise could not be ruled out, but that any move should not be done preemptively.
A possible rate hike would need to be backed by "hard data that inflation expectations are manifesting into growth in wages. Right now there is not that data," she told news website Seznam Zpravy.
(Reporting by Jason Hovet and Robert Muller in Prague Editing by Tomasz Janowski)
((jason.hovet@thomsonreuters.com;))
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