Higher food prices pushed October consumer inflation back to 2.5% growth, keeping the CNB on higher alert

According to the preliminary estimate of the CZSO, annual consumer price inflation accelerated to 2.5% in October 2025 from 2.3% in September, returning to the August rate. This result is above the analysts' consensus (2.3%) but below the CNB's forecast of 2.7% for the final quarter of this year, following its 0.3% point underestimation in September (the new forecast will be published on Thursday). The latest data suggest consumer prices will rise by 2.4% for the rest of the year, averaging 2.5% in 2025 after 2.4% the previous year. This is in line with the CBA's forecast for consumer inflation of 2.5% this year, followed by 2.2% in 2026.

On a month-on-month basis, consumer prices rose by 0.5%, mainly due to the return of higher food prices, which in turn had more dampened price pressures in the previous three months. The 0.2%pt y/y acceleration in CPI growth in October was mainly driven by higher food, alcohol and tobacco prices (0.25%pt change in contribution on 3.9% y/y growth), followed by fuel prices (0.02%pt), which were partly offset by lower energy prices and softer core inflation (both -0.03%pt).

The preliminary data for October do not change the outlook for core inflation dynamics, which remains slightly above the CNB's target for the coming spring. According to our preliminary estimate, October core inflation is likely to remain at or slightly below 2.8% y/y (the CNB expects 2.8% in Q4-25). This estimate assumes a more modest 0.1% m/m increase in non-energy administered prices. If this is correct, then seasonally-adjusted month-on-month core inflation would accelerate to 0.18% in October from an average 0.15% month-on-month increase in the previous three months (0.18% last month).

This would imply faster annualized core inflation growth of 2.2% after 1.9% in the previous three months, which is still in a narrower band around the mid-point of the CNB's inflation target and in line with its core inflation forecast for the end of 2026. At the six-month horizon, i.e. for February-April 2026, I expect annualized core inflation momentum to be 2.3%, slightly above the CNB's inflation target. I have presented the outlook for the CNB's decision here: CNB rate stability beyond November - between the crown and post-election reality. The CBA forecast foresees a slowdown in the core inflation rate to 2.4% in 2026 from 2.7% this year.

The government's programme statement includes items that will further dampen consumer price growth, but also those that may leave an inflationary undercurrent in the economy. Measures that may dampen price growth include transferring the POZE and other regulated components of energy prices to the shoulders of the state budget, restoring the 75% discount on student and senior fares, and reducing VAT on prescription drugs and in the catering industry. On the other hand, however, there are proposals for higher salary increases in the public sphere and a likely resurgence in prices due to the introduction of EET2 in 2027, which could be partly offset by the non-introduction of EUTS2 allowances, or a milder version of them (which in any case is not expected to be launched in the EU until later, in 2028). I have analysed an illustration of the impact of the government's forthcoming plans on prices here: CNB rate stability after November - between the crown and post-election reality.