CBA Monitor

According to Eurostat data for March, the price of diesel at Czech petrol stations rose the most in the EU, by almost 28% month-on-month, while the average increase in the EU was 19%. I am not an expert on the pricing policy of petrol stations, the density of petrol stations or the pricing policy of refineries. However, if I look at the EU fuel price statistics, it is clear that the March jump reflects: 1) the low starting price in the Czech Republic - the third lowest in the EU; 2) the lower taxation of diesel in the Czech Republic - the fourth lowest in the EU; 3) the different pricing and tax policies across EU countries in March.

The average amount of a new mortgage exceeded CZK 4.8 million

Comment by Jaromír Šindel, Chief Economist of the CBA: Mortgage rates are significantly determined by the movement of market interest rates. However, structural factors in the banking market are also important. The CNB's investigation of credit conditions in our analysis helps to explain what factors influence the difference between mortgage and market interest rates deviating from its normal level. The CBA analysis shows that a combination of stronger demand and competition among banks plays a key role. It is the latter that can lead to more favourable rates for clients without undermining market stability. The difference between mortgage rates and market rates that we have been monitoring is therefore mainly dampened by stronger demand, but in an environment of growing competition, which is key. Banks' profitability also plays a role, acting as a corrective mechanism to maintain competitive interest rate spreads but also market stability.

The March acceleration in consumer price inflation to 1.9% was not surprising in itself, but the acceleration in core inflation to 2.9% was less favourable, including the momentum across key segments. This indicates that price pressures in the domestic economy remain strong, especially for labour-intensive services and imputed rents, but also the koruna no longer provides a disinflationary factor for goods prices, amid strong household demand. For the Czech National Bank, the March core inflation is a hawkish signal that may reinforce interest rate growth expectations, especially if the current energy shock persists.

Commentary by Miroslav Zámečník, Chief Advisor of the Czech Banking Association

In Q1 2026, the offer prices of flats rose by 2.7% quarter-on-quarter. The housing market is slowing down slightly in terms of offer prices after last year's significant increase in prices, but price growth remains above average and is not sufficient to improve the ratio of housing prices to household incomes significantly. In the regions, prices continue to rise faster than in Prague and the year-on-year cooling is still evident in Prague. Overall annual growth in the supply side of house prices has slowed to 12.9% from the previous 16-18% during 2025. Higher supply side house prices have been heralded by continued growth in average mortgage rates.

March inflation accelerated to 1.9% year-on-year in March, mainly reflecting higher fuel prices. However, the acceleration was somewhat milder than expected, helped by lower food prices. However, preliminary data suggest an acceleration in core inflation to 2.8%, which is not surprising given the still strong growth in retail sales. Although these did slightly correct the previous strong increase in January in the core segment in February. However, the strength of demand is relatively limited given the rather sluggish sales in services in the first two months of the year. The central bank will monitor the dynamics of these demand pressures, wages and core inflation, which will determine the speed and extent of its interest rate hikes in the coming months. Stronger demand is also translating into more robust imports, shrinking the foreign trade surplus that has not yet been affected by the energy price shock.

The koruna weakened slightly in Q1, especially in March, under the influence of geopolitical tensions and higher risk aversion in the markets. However, higher interest rates prevented a more pronounced depreciation. The Czech currency thus remains stronger than at the beginning of last year, which is also cushioning the effects of the current energy price shock.

According to the CSO statistics, property prices, which include land and family houses, rose by 2% quarter-on-quarter in the final quarter of 2025. This slowed from the previous average 2.6% increase in the previous four quarters. Although the income side of demand is still lagging, real household incomes accelerated more sharply at 1.4% q-o-q (up nearly 3% in nominal terms) at the end of last year. And so did the household savings rate, which rose to 19.7%. Moreover, both figures were positively revised and there was a slight positive revision to GDP growth in the final quarter of 2025, albeit with more limited effects on the economic outlook.

The Czech economy accelerated at the end of last year and maintained its inflationary bias due to strong household consumption and strong wage growth unsupported by productivity. However, the central bank's New Year communication hinted at a possible interest rate cut. However, this rhetoric has been changed by the recent energy shock. For the central bank, the dynamics of core inflation will be key in the coming months, but also the pass-through of higher oil and gas prices to other price segments in the economy. March price expectations rose, but their April perception will be more guiding for the central bank.

February 2026: Growth outlook steady at 2.6% with low price growth