The CNB issues Inflation Report I/2010

The Bank Board of the Czech National Bank today published this year’s first Inflation Report, which is one of the core elements of the central bank’s communication with the public in the inflation-targeting regime. An important part of this quarterly document is a forecast for the Czech economy, representing a key input for monetary policy decision-making. The inflation forecast and the assumptions underlying it are published with the aim of making monetary policy as transparent, comprehensible, predictable and therefore credible as possible. The CNB submits the Inflation Report to the Chamber of Deputies of the Czech Parliament twice a year for review. The current report is based on information available as of 22 January 2010 and the CNB Bank Board approved it at its meeting on 11 February 2010.

The forecast described in this report expects annual headline inflation to rise gradually during 2010, getting temporarily just above the new inflation target of 2% in the second half of the year as a result of tax changes. It will then decline and at the monetary policy horizon, i.e. in 2011 H1, it will be close to the inflation target. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, will be below headline inflation from the start of this year. It will thus approach the CNB target from below over the monetary policy horizon. The contraction of the Czech economy recorded in 2009 will be replaced by modest annual GDP growth in 2010 Q1. However, this growth will slow as the year progresses owing to subdued household consumption, a renewed slowdown in euro area growth and the unwinding of the pro-growth effect of some anti-crisis measures in the Czech Republic and abroad. Growth in domestic economic activity will pick up again in 2011, owing to a more pronounced recovery in external demand. GDP is expected to grow by 1.4% on average in 2010 and by 2.1% on average in 2011. The nominal exchange rate of the koruna is gradually appreciating over the forecast horizon. Consistent with the forecast is stability of short-term interest rates close to current levels in the first half of this year and a gradual rise in rates thereafter.

• Full text (pdf, 4 MB)
• Tables 
• Tables and charts 
• Current CNB forecast

Selected macroeconomic indicators

*CNB's estimate

Marek Petruš, CNB Spokesman