Analysts said April inflation data backed the view, although details on core inflation will be watched closely by the central bank. The bank has also been wary of a pick-up in pay growth. Data this week showed industrial wages grew 9.3% in March.
Market interest rates fell after the inflation data, with a two-year interest rate swap dropping 25 basis points.
Banka Creditas economist Petr Dufek said easing gas prices and weaker demand could push inflation closer to the bank's target. Radomir Jac, chief economist for Generali Investments CEE, said falling inflation, a strong crown currency and government budget cuts "will open up space for a gradual reduction of interest rates at the beginning of this fall." Headline inflation had hit a three-decade peak of 18% in September last year, and the central bank forecasts it at single-digit rates in the second half of the year. Forward rate agreements expect around 50 basis points in interest rate cuts by the end of the year. Interest rates around central Europe are on hold. Hungary's central bank, battling inflation over 20%, cut the top of its interest rate corridor last month, paving the way for eventual cuts.
Poland's central bank left its main rate at 6.75% on
Wednesday, maintaining a view that slowing growth will help curb
inflation.
($1 = 21.2420 Czech crowns)
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Czech inflation ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
(Reporting by Jason Hovet in Prague; Editing by Angus MacSwan
and Christina Fincher)
