In early 2025, the Czech Republic faces sustained inflation, particularly in services and food, hindering the Czech National Bank's (ČNB) ability to reduce interest rates. January's inflation exceeded the ČNB's forecast of 2.6%, reaching 2.8%, mainly due to rising costs in dining and accommodation. For instance, mountain resort stays increased by nearly 10% year-on-year, Valentine's dinners by over 5%, chocolates by almost 28%, and wine prices rose by 13% compared to late 2024. These price hikes are significant contributors to the current inflationary trend.

Although energy prices have declined—electricity by 5% and natural gas by 8%—these reductions have not offset the overall inflation. The ČNB aims to maintain inflation at 2% annually; however, the persistent price increases in services and food sectors complicate this goal. Economists, like Petr Dufek from Creditas Bank, note that inflationary pressures in services remain strong, and food prices are rising rapidly. Consequently, the ČNB is expected to adjust interest rates cautiously, maintaining higher borrowing costs for a longer period.

This monetary stance implies that mortgages and consumer loans will remain expensive, making housing less accessible. Analysts, including Dominik Rusinko from ČSOB, warn that continued inflation in services and food could necessitate stricter monetary policies. The current base interest rate stands at 3.75%, with expectations of only one rate cut in the near future. Therefore, hopes for cheaper mortgages and improved housing affordability are unlikely to materialize soon.

Source: E15