Czech inflation hovered just above zero at the end of 2015 although analysts expect a strong economy and the fading impact of slumping fuel prices to give prices a boost this year as the central bank debates when to end its weak crown policy. The central bank has used a weakened crown as its main monetary policy tool since 2013, aiming to return inflation, slowed by low global oil prices and a struggling euro zone, to its 2 percent target.
It has signalled the policy could end at around the end of this year, but some analysts and central bankers see chances of keeping the crown weak into 2017. Data on Tuesday did little to diminish the view of a later exit, with annual inflation stuck at a rate of 0.1 percent in December, well below a 0.8 percent rise expected by the central bank and coming at a time when the Czech economy is among the fastest-growing in the European Union.
The economy likely grew more than 4 percent in 2015 thanks to an influx of EU development funds, rising exports and stronger domestic sales, as expected by the central bank and Finance Ministry. On Tuesday, the statistics office revised its third-quarter gross domestic product growth estimate to 4.7 percent year-on-year. It also reported November retail sales grew 6.8 percent.
Still, external factors are weighing on prices and analysts say low oil prices will continue to have an impact on annual inflation but much lighter than last year. ING Czech chief economist Jakub Seidler estimated the average annual inflation rate in 2016 would trail the central bank's forecast of 1.4 percent, causing it to delay its exit from the weak crown policy.
Comments
Comments are closed.