Czech inflation slows, adding to case for unchanged rates

Credit: REUTERS/David W Cerny

Czech inflation slowed to a lower-than-expected 2.8% in April, supporting expectations of unchanged interest rates through to 2020 as the central bank juggles the impact of domestic price pressures against a backdrop of economic weakness abroad.

Adds analyst comments

PRAGUE, May 13 (Reuters) - Czech inflation slowed to a lower-than-expected 2.8% in April, supporting expectations of unchanged interest rates through to 2020 as the central bank juggles the impact of domestic price pressures against a backdrop of economic weakness abroad.

The headline annual figure eased from a reading of 3.0% in March, when it rose at its fastest rise since 2012. The statistics office said falling alcohol and tobacco prices drove the deceleration.

Analysts had expected an unchanged rate. The bank, which forecast a 2.9% reading, targets inflation of 2 percent plus or minus 1 percentage point.

In the eighth increase in a tightening cycle begun in 2017. the Czech National Bank's board voted unanimously on May 2 to raise the main two-week repo rate CZCBIR=ECI by 25 basis points to 2.00%.

It signalled broad rate stability after that until mid-2020 as it has been balancing domestic inflation pressures and the tightest labour in the European Union against the flagging economies of Germany and other western trading partners.

Czech analysts saw Monday's data confirming the expectations of stable rates.

"Although inflation came out slightly below the central bank's expectations in April, it is generally in line with the bank's outlook and therefore also with the expectation that interest rates will remain at the current level for a long time," said Jakub Seidler, ING chief economist.

On a monthly basis, consumer prices rose by 0.1% in April.

CONSUMER INFLATION

04/19

03/19

04/18

pct change month/month

0.1

0.2

0.3

pct change year/year

2.8

3.0

1.9

NOTE. The average rate of inflation over the past 12 months was 2.4 percent through April.

Details on https://www.czso.cz/csu/czso/home

** To monitor in real-time Czech economic data releases in the Eikon app and view historical data click: reuters://realtime/verb=Open/url=cpurl://apps.cp./Apps/Economic-Monitor?g=2E

Czech inflationhttps://tmsnrt.rs/2VXToXT

(Reporting by Jason Hovet and Robert Muller; editing by John Stonestreet)

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