March consumer price inflation print of 3.0% y/y is the highest since 2012.
The Czech National Bank halted its interest rate rises in December 2018, after seven 0.25% hikes to 1.75%. Did they halt too early? We continue to believe the CNB would like to achieve “positive real interest rates”, which means the rate being higher than inflation. With CPI at 3.0%, it is -1.25% below that level. Inflation pressures are still present: Czech wage growth is still almost 7% y/y, with talk of the minimum wage being hiked another 12% in 2020. The cost of housing is rising. Unemployment is still at rock-bottom levels. Despite a slowing German and global economy, we see scope for more CNB rate hikes in the coming months.
Czech inflation versus interest rates