The Czech central bank in 2013 imposed a cap on the koruna against the euro in a bid to ward off deflation. However, with prices rising, it dropped the peg in April 2017, and the Czech currency has since strengthened.
The Czech economy had a very strong second quarter, thanks in part to a rise in both household consumption and investment, which has led economists to revise upwards their forecasts for the full year.
The Czech central bank expects inflation to remain in the “upper half” of its target band of 1-3 per cent for the rest of this year, and analysts have been increasing their forecasts for 2017 as strong wage growth puts pressure on prices. However, the central bank expects inflation to fall towards its 2 per cent target in early 2018.
The Czech current account surplus has been driven by a combination of strong foreign demand for products from its manufacturing sector and low costs in recent years, and economists expect it to remain at a similar level in 2018.