Response to the CPI

"The trend of certain acceleration, which we are witnessing, is not a big surprise.

However, it is the fact that both net inflation and the CPI figures are slightly higher than expected. Reasons for this can be seen see in the movement of the three slightly more volatile groups: in the transport sector, as expected, the consequences of the oil price rise did not feed through into petrol prices on a cumulated basis until December, while no response had been recorded in November. In the leisure activities group the trend of the previous month continues. The food group, where we expected an increase in the price index, saw a certain correction at the end of the year. The increase, nevertheless, is higher than expected.

Though prices somehow revived as expected, the values as of the end of the month and the end of the year are highly positive and a certain inaccuracy can be explained by the correction of these more volatile groups at the year-end. In view of our short-term target in 1999, we remain below the set inflation values, i.e. the Czech Republic continues to be a country with very low inflation".

(Miroslav Hrnčíř, Bank Board member)