Inflation in the Czech Republic has been rising recently, with prices in our country rising at the fastest pace in the past five years. However, economists say that inflation has peaked and will see a turnaround. Livestock prices will stabilize again, and fuel oil prices will brake next year thanks to cheap crude oil. Thus, we can expect inflation to ease in the coming months.
Food prices are rising because of the increased income of Czechs. Butter is at 51% and eggs at 37%. In addition to food, real estate and interest rates also rise. In addition, spending has increased significantly in recent months, which is reflected in the overall economy.
The term inflation can also be understood as an increase in the price level over time and is measured by the consumer price index in all EU countries. For a country\’s financial sector, low inflation is most beneficial because it is a factor that drives interest rates, while high inflation overheats a country\’s economy
For example, in 2008, inflation rose by 3.7% per year. Only the Baltic countries, Romania, and Bulgaria had higher inflation rates than the Czech Republic; from 2002 to 2007, the Czech Republic had one of the lowest inflation rates. However, the highest rates were 10.7% in 1998 and 10% in 1994.
During periods of high inflation, only citizens who have fixed their loan payments over the long term benefit from it. For most, however, the loss comes in the form of increased spending on purchased goods and services.
Deflation, which we understand to be the opposite of inflation, is good news for citizens because they will purchase more goods for the same wage. On the other hand, this phenomenon is not good for the country\’s economy. Creditors struggle to repay debts that are higher because of deflation, and people stop saving because interest rates are not high enough. It also leads to higher unemployment.
Starting January 2018, the consumer price index will be calculated according to a newly introduced classification that introduces a more detailed breakdown in the consumer basket.