Czech Inflation Eases as Central Bank Mulls Timing of Rate Cuts

Czech Inflation Eases as Central Bank Mulls Timing of Rate Cuts

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(Bloomberg) — Czech inflation eased in November but remained well above the target as policymakers are deciding whether to start cutting borrowing costs later this month or hold off until next year. 

Consumer prices rose 7.3% from a year earlier, compared with 8.5% in the previous month, the statistics office in Prague said on Monday. The reading was slightly above the 7.2% estimate in a Bloomberg survey and the central bank’s 7.1% projection for the month.

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After months of a steady decline, inflation temporarily rebounded in the fourth quarter due to the fading impact of last year’s energy subsidies. The central bank expects price growth to slow to near its 2% target early next year, which should allow the Czech Republic to join peers in Poland and Hungary in monetary-policy easing.

The $300 billion economy is teetering on the bring of a recession as households curb spending, export-dependent industries suffer from weak demand in Germany and the government plans fiscal restrictions. The central bank’s own forecast suggested rate-cuts starting already in the third quarter, but most policymakers are concerned about entrenched price pressures.

The majority of board members voted to keep the benchmark rate at 7% last month — the highest level in nearly a quarter-century — because of worries about the traditional January increase in prices of goods and services. The next monetary-policy meeting is scheduled for Dec. 21. 

The central bank will provide further comments about price trends and release the closely-watched core inflation measure of underlying domestic pressures at 1 p.m. in Prague.  

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