No Need to Touch Czech Interest Rates Despite Upbeat Core Inflation

ING argues that the Czech National Bank should keep interest rates steady despite 2.9% core inflation, as food prices are cooling and growth risks are rising.

Key Takeaways

• 1.Czech headline inflation stood at 2.5% YoY in April, while core inflation reached 2.9%, driven by high services prices.
• 2.The Czech National Bank (CNB) is expected to maintain interest rates at current levels to avoid damaging economic growth amidst uncertainty.
• 3.Real interest rates are projected to remain in positive (restrictive) territory, which ING argues is sufficient for policy tightening.

Table of Contents

• Food prices hold headline inflation back
• Core rate set to remain elevated
• Headline inflation set to peak early next year
• Regulated and food prices pose risks to next year's inflation
• Don't push the economy across the cliff
• Real interest set to remain in the positive territory

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