Comment by Jaromír Šindel, Chief Economist of the CBA: The deterioration in economic sentiment in December does not yet represent a turning point for the outlook for the Czech economic recovery, which anticipates a deterioration in dynamics at the end of the year 2025. Household consumption plans remain resilient, while industry and the labour market are sending rather cautious signals, which poses a risk to the expected recovery in investment activity and the early stabilisation of rising registered unemployment. The outlook for lower administered energy prices supports falling price expectations, but persistent pressures in construction and services continue to dampen disinflationary optimism, sending a neutral rather than dovish message to the central bank.
Economics
Comment by Jaromír Šindel, Chief Economist of the CBA: The central bank did not surprise by unanimously leaving interest rates unchanged, i.e. with the two-week repo rate at 3.50%, for the fifth meeting in a row after a 25bp cut in May. Although the Board did not change its view of the risks and uncertainties surrounding the CNB's November forecast, it did assess the risks to inflation as balanced, given the risks in financial markets and the removal of the renewable energy levy, following November's upside assessment.
Comment by Jaromír Šindel, Chief Economist of the CBA: November consumer price growth did not slow to 2.1% year-on-year only thanks to volatile food prices, which were lower in November. The slowdown in core inflation to 2.6% was probably also due to lower prices for holidays, clothing, household furnishings, as well as lower prices in healthcare and energy. This, and November's move closer to the price inflation target for both headline and core inflation, eases hawkish pressures on the central bank. However, the continued brisk momentum in rent and food and other service prices will not allow the central bank to contemplate an interest rate cut.
Comment by Jaromír Šindel, Chief Economist of the CBA: The manufacturing part of the Czech economy remained subdued in October, which supports expectations of weaker GDP growth at the end of this year. However, a post-covetous historical foreign trade surplus is supporting the crown, which, together with a persistently solid wage pace, supported October retail sales. This part of the recent Czech growth model thus remains unchanged, but this is no longer the case for the construction sector, where persistent weakness in building permits and uncertainty over investment financing pose downside risks next year.
Comment by Jaromír Šindel, Chief Economist of the CBA: Consumer price growth slowed to 2.1% yoy in November. The main reason was a deeper decline in food prices, partly due to a slowdown in core inflation from the recent 2.8%. Thus, although inflation surprised positively, food price volatility and still strong rapid wage growth of 7.1% in Q3 will dampen the CNB's willingness to return to rate cuts. And the same reasons dampen the risks to the CBA's outlook for consumer inflation next year at around 2.2%. There remains a significant gap in the recovery in real gross wages between the market and non-market sectors.
Comment by Jaromír Šindel, Chief Economist of the CBA: The stronger quarter-on-quarter GDP growth of 0.8% in Q3 mainly reflected foreign trade, while the contribution of domestic demand was not as strong as in the previous quarter. Moreover, there has been a continuous decline in fixed investment excluding construction investment, undermining the future potential of the economy and keeping productivity growth low and fuelling inflationary growth in unit labour costs (see five key points below).
Comment by Jaromír Šindel, Chief Economist of the CBA: The Central Bank, through stricter requirements in the form of recommendations for investment mortgages, has decided to make a modest effort to correct mortgage demand on the real estate market, which remains very tight in terms of prices, mainly due to the supply side - see the drop in building permits.
Comment by Jaromír Šindel, Chief Economist of the CBA: November's confidence in the Czech economy weakened slightly, but still suggests continued growth. However, there are significant differences across sectors, reflecting the looming change in economic policy after the elections. Households remain visibly more optimistic, thanks to rapidly rising wages and perhaps in response to the new government's plans, while industry is returning to earlier weakness. Services are again reporting rising price expectations, keeping the central bank in hawkish mode.
Comment by Jaromír Šindel, Chief Economist of the CBA: October consumer inflation not only confirmed a more pronounced shock from higher food prices, but also showed higher prices of transport services and prices of means of transport as part of core inflation. In the longer term, it is worth noting that imputed rental prices have already caught up with the previous inflation shock, and the same has been true for a few months for holiday prices. Thus, the higher October inflation and unemployment data will not help the central bank or the market resolve its dilemma of the next interest rate move.
Comment by Jaromír Šindel, Chief Economist of the CBA: Retail and services sales disappointed in September despite solid wage growth, which was confirmed by September industrial wages. A gradual but steady rise in unemployment is likely to be in evidence here. Thus, the stronger GDP growth in Q3 was helped by September's industrial production, which complemented the strong construction output of the previous months. Given sentiment, things might not be different in October.
Comment by Jaromír Šindel, Chief Economist of the CBA: The CNB is waiting for a new impulse. The CNB is waiting for the new government to announce its plans, both from the data and from future analysis of the new government's upcoming plans. The CNB's own outlook, with more moderate consumer price growth at the end of the year and a stronger economy in real terms in Q3, opens up the possibility of more hawkish communication in the rest of the year. But I believe the CNB will wait to reassess its communication until the contours of the new government's policy are clearer.
Comment by Jaromír Šindel, Chief Economist of the CBA: The return of consumer price inflation to 2.5% in October will keep the CNB vigilant. Although this was due to higher food prices, the current core inflation rate remains slightly above the inflation target, which will probably be evident next spring. Although selected plans of the new coalition will help to further tame price rises, others are more likely to maintain an inflationary undercurrent in the economy.
Comment by Jaromír Šindel, Chief Economist of the CBA: The stronger koruna, lower inflation, and the return of productivity growth give the central bank some relief, allowing it to monitor how wages and the post-election fiscal plans—often pulling in opposite directions—will play out.
Commentary by Miroslav Zámečník, Chief Advisor of the Czech Banking Association
Comment by Jaromír Šindel, Chief Economist of the CBA: The return to stronger economic growth of 0.7% quarter-on-quarter in Q3 was a surprise, confirming the indications of stronger confidence in September. At the same time, stagnant employment added a welcome return to stronger productivity, which may partially dampen the hawkish impulse of stronger GDP for the CNB. The CNB will most likely leave interest rates unchanged at 3.5%, not only at the November meeting, but GDP details may set a more distinct tone to its communication later in November.
Comment by Jaromír Šindel, Chief Economist of the CBA: Stronger sentiment in October suggests a return to stronger GDP growth for the end of this year after a probably slightly worse result in Q3. Higher price expectations may delay the return of core inflation to the target.
Comment by Jaromír Šindel, Chief Economist of the CBA: Lower food prices, a seasonal decline in holiday prices and a slight catch-up in education prices contributed to September's more moderate consumer price growth of 2.3%, which, however, reminds us of possible price catch-up in other segments next year as well (see Chart 4).
Comment by Jaromír Šindel, Chief Economist of the CBA: The continuation of the construction boom and the recovery in retail sales in August was dampened by the return of weaker industrial production, despite stronger exports. However, the positive sentiment in September suggests that the slowdown in GDP growth in Q3 may not be as pronounced as the July and August figures suggest.
Comment by Jaromír Šindel, Chief Economist of the CBA: The more pronounced slowdown in September consumer price growth to 2.3% year on year reflects a decline in most components of the consumer basket. There are three messages for the CNB that are likely to leave the CNB's communication unchanged, i.e. open to all interest rate possibilities.
Comment by Jaromír Šindel, Chief Economist of the CBA: The recovery in disposable income in Q2 was still dampened by fiscal policy, so it remained weaker compared to the increase in wages and property prices. Nevertheless, households managed to increase both consumption and their savings.
Comment by Jaromír Šindel, Chief Economist at the CBA: September sentiment brings a boost after weaker monthly data in July and thus better prospects for GDP growth - mainly thanks to retail trade and construction.
Comment by Jaromír Šindel, Chief Economist at the CBA: While the CNB unsurprisingly left interest rates unchanged with the two-week repo rate at 3.5%, the Board's statement on the monetary policy settings, however, was more surprising in its less hawkish tone, leaving open all possibilities for future monetary policy settings.
Commentary by Jaromír Šindel, Chief Economist of the CBA: Higher-than-expected wage growth will be the main, but not the only, reason for keeping the interest rate at 3.5% at the CNB's September meeting and for the intensification of the hawkish tone in the communication. The latter may indeed indicate a further upward movement in the interest rate, but rather in an unspecified distant horizon. A stronger koruna or tighter monetary policy through the longer end of the yield curve is unlikely to lead the CNB to a dovish mindset.
Economic commentary by Jaromír Šindel, Chief Economist of the CBA: CPI growth slowed to 2.5% yoy in August, but core inflation accelerated slightly to 2.8% in line with the CNB's forecast. The core services price segment, excluding imputed rent, accelerated month-on-month in August, but its three-month average remains well below the pace observed in H1-2025.
Economic commentary by Jaromír Šindel, Chief Economist of the CBA: Although the economy breathed a half-percent growth in the second quarter, the July figures were rather disappointing and suggest a cooling. However, the Czech economy is generating upside risks to inflation, which limits the room for manoeuvre of the CNB, which is likely to stick to the CNB's 3.5% terminal interest rate thesis. August's registered unemployment confirmed a worse trend, which, however, is not confirmed by other data.
Commentary by Miroslav Zámečník, Chief Advisor of the Czech Banking Association
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA (adjusted for published data on core inflation from the CNB and registered unemployment data, 18:00 8 August)
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Significant slowdown in April consumer inflation to 1.8% yoy, but still strong core inflation growth
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Trump's Reciprocal Tariffs, vol. II: Will Trump's reciprocal tariffs maths affect the EU's response?
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
The CNB Bank Board left interest rates unchanged in March.
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromir Šindel, Chief Economist of the CBA
Economic commentary by Jaromír Šindel, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Industry above expectations in August due to the impact of the holidays, stagnated during the summer
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA
Economic commentary by Jakub Seidler, Chief Economist of the CBA