The Czech National Bank's Inflation Report for the first quarter 1999

The Czech National Bank's quarterly Inflation Report keeps the public abrea st of the latest economic and monetary developments in the Czech Republic. It assesses the major factors influencing inflation, and explains the CNB's changes of monetary policy in terms of the past inflation record. Also, it summarizes the Bank's expectations regarding future inflationary trends. In the first quarter of 1999 (Q1 1999), the disinflation process continued. In March, price indices hit their lowest level since the start of the tran sformation. Net inflation (y-on-y) was -0.4%, 2.1 percentage points lower t han in Q4 1998, while the CPI fell from 6.8% to 2.5%. The major factors beh ind the robust disinflation are the exceptional development of food prices, the favorable effects of low commodity prices on world markets, an appreci ated currency, and weak domestic demand. Although some reversal of the favo rable tendencies was seen at the end of the quarter, generally low inflatio nary pressures are likely to persist in the near future. According to the l atest forecast, in March 2000 net inflation will be in the range of 3.7-6.7 %, and the CPI will still be between 6.2-8.4%. These figures imply 1) comfo rtable fulfillment of the inflation target in 2000, and 2) performance near the lower range of the target by the end of 1999.