Czech inflation rose to 2.5% year-on-year in October, slightly above expectations, mainly due to higher food prices.

Processed foods jumped by 4%, and overall consumer prices increased by 0.5% month-on-month. Service prices grew by 4.6%, while goods rose by 1.3%, indicating that core inflation likely reached 2.9%.

Economists expect inflation to ease next year as energy prices decline. Distributors plan to cut electricity and gas prices by around 10% in January 2026, which could lower headline inflation to about 2.2%—and possibly below 2% if the government reduces regulated energy costs as planned.

Still, core inflation is likely to stay above the Czech National Bank’s target, supported by household spending and expected wage hikes in the public sector ranging from 5% to 13%.

The economy is projected to grow 2.6% this year and 2.7% in 2026, driven by rising investment and strong household consumption.

Czech companies are increasingly investing abroad, especially in Germany, taking advantage of opportunities in its slowing economy.

Interest rates are expected to remain stable next year, as steady growth and resilient consumer demand offset the effects of lower energy costs.

If the EU delays the new emissions trading system (ETS2) by a year, analysts say 2027 could mark a strong recovery period for the Czech economy, allowing Europe to avoid another energy shock.

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