Czech National Bank's Inflation report for fourth quarter 1998

The Czech National Bank publishes quarterly inflation reports to inform the public about the development of the Czech economy and the reactions of mon etary policy to that development. Disinflation continued in fourth quarter 1998: Inflation fell to 6.8% in De cember, as measured by the year-on-year CPI, while year-on-year net inflati on fell from 4.3% [in September] to 1.7% in December. A decrease in real GD P and domestic demand remained the main feature of the Czech economy in the fourth quarter of 1998. The lower inflation was caused mainly by falling i mport prices, slow growth of nominal wages, and strong koruna. But some new tendencies appeared in the fourth quarter which are likely to continue. Ex ternal imbalance is worsening, due to the lowered ability of domestic produ cers to compete on foreign markets; the weakening demand for Czech exports also become apparent. The development of the economy allowed the CNB to trim, in stages, its key interest rate from 12.5% in October to 9.5% in December.