The withdrawal of 10- and 20-heller coins and its possible impact on prices
On 1 October 2003, the 10-heller and 20-heller coins will cease to be legal tender. Retailers have two options for dealing with this: either they can round off all their prices to the nearest 50 hellers (in which case it can be expected that most prices will be rounded upwards), or they can leave their individual prices unrounded and only round off the price of the overall purchase.
In the event of all prices being rounded up to the nearest 50 hellers (this representing the upper limit of the possible impacts on prices of the withdrawal of the coins), one can predict that low-cost items will be most affected by this measure, as a rise in price of, say, 20 hellers would mean a relatively large percentage increase. In contrast, prices of the vast majority of goods costing more than CZK 150 are already rounded off to whole korunas, as are those of roughly half the items costing between CZK 50 and CZK 150. Drawing on these predictions one can estimate the maximum possible impact of the withdrawal of the coins on inflation (see the table).
The estimated maximum impacts of the withdrawal of 10- and 20-heller coins on inflation are relatively small
| Items costing | Total | ||
|---|---|---|---|
| less than CZK 50 | CZK 50 - 150 | ||
| No. in consumer basket | 250 | 180 | 430 |
| Constant weight (in per cent) | 42,7 | 19,5 | 62,2 |
| Average price (in CZK) | 20,51 | 88,76 | |
| Average price increase rounded up (in CZK) | 0,25 | 0,125 | |
| Average price increase (in per cent) | 1,22 | 0,14 | |
| Max. impact on inflation (in p. p.) | 0,52 | 0,03 | 0,55 |
| Note: Prices of items costing more than CZK 150 are assumed to be already rounded up | |||
However, the one-off increase in prices described above can be viewed as highly unlikely. The withdrawal of the 10- and 20-heller pieces was announced well back and many prices have already been rounded off by retailers. Many major retailers have also said that they will only round off prices of total purchases. This means that if, when the coins are withdrawn, only around half the as yet unrounded consumer prices are rounded upwards, the price impact will be no more than 0.3 percentage points. What is more, this impact will probably be spread out over a longer timescale.