August consumer prices show more moderate momentum in core services inflation

10. 9. 2025
5 min. reading
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.
August consumer prices show more moderate momentum in core services inflation ilustrační foto
The article was updated at 17:00 (10 September) with newly published CNB data on core inflation, which showed slightly higher growth in core inflation (+0.05% points), its services segment excluding imputed rent (+0.1% points), compared with my original estimate, partly offset by a more modest rise in tradable core inflation (-0.1% points).

CPI growth slowed to 2.5% y/y in August, but core inflation appears to have accelerated slightly to 2.8% in line with the CNB's forecast. However, its momentum remains more moderate than in the first half of the year and is broadly in line with the CNB's annual outlook. This may put an end to the hawkish sentiment at the CNB, but the Board will be relieved to see even slower unit cost growth in the economy, something that was not evident in Q2 (see discussion here: July's weak industrial and services recovery hampered the continuation of solid GDP growth). August inflation therefore keeps the CNB's interest rate outlook unchanged at 3.5%. However, the still moderate momentum in core inflation maintains the possibility that the next move in the CBR rate may be down rather than up. However, this direction may be altered by a possible inflationary outcome of the October elections.
Despite the slowdown in August consumer inflation, we see a rather mild inflationary surprise for the CNB. The CZSO confirmed its preliminary estimate of a slowdown in annual consumer price inflation to 2.5% in August from 2.7% in July. This result is in line with analysts' consensus. Although the pace of consumer inflation came in 0.2% points below the CNB's forecast (after shooting up 0.1% points in July), the CNB data point to a slight acceleration in core inflation to 2.8% from 2.7% in July, which is in line with the CNB's outlook.
However, the momentum in core inflation remains moderate, slightly above the CNB's outlook at the annual horizon. Seasonally adjusted month-on-month core inflation accelerated to 0.35% in August from an average increase of 0.2% in the previous three months. All three key segments of core inflation (goods, services, imputed rent) accelerated slightly in August. However, this is likely a correction after a weaker July, when the overall core remained virtually unchanged, and all three segments maintained their slightly downward trend in August.
Imputed rents still pose a challenge for the CNB, but the rest of the core services confirmed a slowdown in their momentum (see Charts 5-6). Imputed rents still hold strong implied annualized growth of 4.7% y/y, while the rest of the core services segment has accelerated slightly to 2.2% annualized growth in the past three months from 2.1% in June and remains (including the outlook) below the 4.5% momentum seen in June this year. Thus, headline core inflation momentum has accelerated slightly to 2.4% annualized growth in the past three months from 2.3% in July. Thus, it remains closer to the mid-point of the CBA's inflation target (compared to average annualized growth of around 3.3% in the first half of the year) and is thus close to its core inflation forecast of 2.2% y/y for Q3 2026. The CBA's forecast envisages a slowdown in the pace of core inflation to 2.4% in 2026 from 2.7% this year.
On a month-on-month basis, consumer prices rose by 0.1% in August, mainly due to a slightly higher month-on-month increase in holiday prices compared to other years (see Chart 4), but for now their momentum is in line with last year and we should therefore see the usual correction in September.
The latest data suggest consumer price growth of around 2.5-2.6% for the rest of the year; i.e. an average of 2.5% in 2025 after 2.4% the previous year. This roughly corresponds to the CBA's forecast for consumer inflation of 2.5% this year followed by 2.2% in 2026.


Note: Unless otherwise stated, we use seasonally adjusted figures in the text. Annualized developments show possible year-on-year growth in the annual outlook if current month-on-month dynamics were to be maintained.