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
According to the preliminary estimate of the Czech Statistical Office, annual consumer price growth slowed significantly to 1.8% in April 2025 from 2.7% in March and February, mainly due to lower food prices in contrast to last year's increase and falling fuel prices. The April result missed analysts' expectations (2.1%). However, I estimate that core inflation maintains a stronger momentum, albeit slightly softer than in Q1. Slower consumer price growth in April raises the likelihood of a CNB rate cut to 3.5% tomorrow. Although core inflation and the current momentum in the economy may still make a strong case for keeping the rate at 3.75% given the still high degree of uncertainty about the outcome of the tariff wars.
Lower food prices, combined with stronger growth last April (-0.7% points; see Figures 1 and 3), were the main contributors to April's moderation in annual CPI growth (-0.9% points). Fuel prices (-0.2% points) added to this. Our preliminary estimate is that core inflation is likely to remain at 2.5% y/y as in March. This implies a slightly more moderate 0.5% month-on-month increase in non-energy administered prices in April.
If this is correct, then seasonally adjusted month-on-month core inflation growth would have slowed to 0.2% in April from an average 0.27% month-on-month increase in Q1. This would imply slightly slower annualized growth of 2.4% in April after 3.3% in the previous three months, but still above the CNB's inflation target and also above its forecast of 2.1% y/y for Q2 2026.
The Czech central bank's February prediction was for a slowdown in CPI growth to 2.2% in Q2 from 2.6% (vs. 2.7% in reality), with core inflation rising steadily at 2.5%. From this perspective, the April inflation numbers bring some relief, but more due to food price volatility and a decline in fuel prices, which currently looks more sustained given oil prices. However, there is also a degree of uncertainty with regard to the evolution of the world economy, through the uncertainty of tariff wars.
The CSO will announce the final number for April inflation on May 13, when the CBN will announce its estimate of core inflation after lunch.