Inflation remains unchanged in November 2024, staying within the tolerance band around the CNB’s 2% target

The CNB comments on the November 2024 inflation figures

According to figures released today, the price level increased by 2.8% year on year in November 2024. Annual consumer price inflation was unchanged compared to the previous month and is thus in the upper half of the tolerance band around the CNB’s 2% target.

Annual inflation was 0.1 pp lower in November than the CNB’s autumn forecast. Even within the structure of the consumer basket, deviations from the forecast were not significant. Somewhat faster growth in administered prices was offset by slightly weaker growth in prices of food, beverages and tobacco and a slightly larger decrease in fuel prices. Core inflation was also slightly lower than forecasted.

Core inflation is being driven by wage growth in the domestic economy, which is affecting services prices in particular. Their increased growth is relatively broad-based and concerns accommodation and food service activities, package holiday prices, etc. Conversely, the previous protracted decline in domestic demand, due in part to the CNB’s tight monetary policy, is dampening core inflation. This is fostering a decrease in the profit mark-ups of producers, retailers and service providers over their costs, which is partly offsetting the effect of rising wages on services prices. Goods prices within core inflation are virtually flat year on year. The ongoing recovery in the property market is being reflected in positive growth in imputed rent, although it fell slightly compared to the previous month.

Among other factors, growth in the prices of electricity, water supply and sewerage charges, along with the prices of tobacco products, contributed significantly to annual inflation in November. Growth in prices of food and non-alcoholic beverages accelerated year on year. By contrast, inflation was dampened by a continued decline in fuel prices as a result of the previous decrease in oil prices on global markets. 

The price level increased by 0.1% in November compared to the previous month. According to the CNB’s autumn forecast, annual inflation will temporarily rise slightly above the upper boundary of the tolerance band at the end of this year. This will be due partly to the statistical effect of the low comparison base in December 2023, when retailers incorporated the decrease in VAT on food into prices in advance. A gradual pass-through of the higher prices of some food commodities into retail prices will act in the same direction. The increase in the price level will slow next year, gradually returning to the central bank’s 2% target, as administered price inflation will slow markedly from January onwards. Fuel prices will continue to decline year on year in 2025. Core inflation will remain slightly above 2% in the quarters ahead. Its expected developments will reflect not only fading cost pressures, but also subdued demand in the Czech economy.

Petr Král, Executive Director, Monetary Department