Inflation in the Czech Republic continued to cool in September, dropping to 2.3% year-on-year from 2.5% in August, according to a preliminary estimate released by the Czech Statistical Office (ČSÚ). Consumer prices fell by 0.6% compared to the previous month, marking one of the sharpest monthly declines this year.

The figures indicate that inflation is now approaching the Czech National Bank’s 2% target, supported by cheaper food and fuel. The slowdown follows a summer peak in June when prices were up 2.9% annually before gradually easing through July and August.

Energy remained the only category showing year-on-year price declines, falling by 3.3%. Without energy prices included, inflation would have stood at 3.1%. Price growth also moderated for food and other goods. The cost of food, alcohol, and tobacco rose 2.9% in September, down from 4% a month earlier, while goods prices increased just 0.8%. Service prices, however, held steady with a 4.7% rise, suggesting that underlying inflation pressures remain in parts of the economy less affected by global price shifts.

Economists say the weaker-than-expected data was largely driven by lower food prices, particularly for butter and seasonal fruit, as well as a continued fall in fuel costs. The koruna’s appreciation against the dollar and lower global oil prices helped ease transport-related expenses.

“The main reason for the decline was the drop in food prices, followed by cheaper fuel,” said David Marek, chief economist at Deloitte. “The strengthening of the koruna also played a role, cushioning the impact of global energy prices.”

Other analysts noted that the timing of this year’s harvest may have shifted the usual seasonal pattern. “Food prices rose unexpectedly in August but fell back in September, suggesting that the effects of this year’s harvest were simply delayed,” said Vít Hradil, chief economist at Investika.

While the overall slowdown is encouraging, most analysts caution against expecting an immediate policy shift from the Czech National Bank. “Inflation came in below the central bank’s forecast of 2.6%, but the CNB is unlikely to react by cutting interest rates,” said Radomír Jáč, chief economist at Generali Investments CEE. “Price growth in services remains elevated, which will make policymakers cautious.”

The CNB’s key interest rate currently stands at 3.5%. Many expect the central bank to keep rates unchanged for several more months to ensure inflation remains anchored near its target.

Jan Bureš, chief economist at Patria Finance, added that the downward trend in food and energy prices may continue into the final quarter of the year. “We could see inflation move closer to 2% in October or November, especially if the disinflationary trend in energy persists,” he said.

For now, the Czech Republic remains one of the few countries in the EU where inflation has returned close to pre-crisis levels, offering a sign of relief for households after two years of price volatility. Still, economists warn that service-sector inflation and wage growth could keep underlying pressures alive into 2026.

Source: CTK

Czech voters have handed a fresh mandate to former prime minister Andrej Babiš, whose centrist-populist ANO movement emerged as the clear winner in this weekend’s parliamentary election. The result marks a shift in the country’s political mood after years of centre-right rule and could reshape Prague’s approach to both domestic and European affairs.

According to early results, ANO won roughly a third of the national vote, well ahead of the parties in the outgoing government led by Prime Minister Petr Fiala. While Babiš’s victory was decisive, it fell short of an outright majority, leaving him dependent on smaller right-wing or nationalist parties to assemble a workable coalition. That task may prove complicated, as some potential partners are demanding high-profile positions or policy concessions.

The election was widely seen as a referendum on the direction of the country after a turbulent period of inflation, rising living costs, and social division. Babiš capitalized on voter fatigue with the austerity-minded Fiala government, promising to boost wages, cut taxes, and reduce household expenses. His campaign focused on restoring economic stability and protecting “national interests,” a message that resonated strongly with voters outside major cities.

For Fiala’s coalition, which had presented itself as a pro-European, reform-driven administration, the result is a major setback. The outgoing government had invested heavily in foreign policy—supporting Ukraine, strengthening cooperation within the EU and NATO, and backing ambitious climate initiatives—but critics argued it failed to address domestic pressures at home. Many voters expressed frustration that while the Czech Republic had taken on a prominent role in Europe, ordinary families were struggling to cope with energy costs and stagnant wages.

Babiš’s return to power raises questions about the Czech Republic’s future course in Europe. He has long been critical of Brussels on issues such as migration quotas, climate targets, and the distribution of EU funds, yet he has stopped short of calling for any withdrawal from the bloc. His likely coalition partners, however, may push for a more confrontational stance toward EU institutions, potentially aligning Prague more closely with the governments of Budapest and Bratislava.

Foreign policy observers are also watching closely to see whether the Czech Republic will maintain its strong backing for Ukraine. While President Petr Pavel has urged continuity in military and humanitarian support, Babiš has signaled a desire to prioritize domestic spending and has questioned the scale of Prague’s aid commitments. How these differences play out could determine whether the country remains one of Kyiv’s most outspoken allies.

At home, the new government faces a delicate balancing act. Babiš, a billionaire businessman and one of the country’s most polarizing figures, will have to reassure investors and allies that he intends to govern pragmatically, not ideologically. His critics worry that a coalition dependent on fringe movements could erode institutional checks or deepen divisions in Czech politics. Supporters, however, say his victory represents a needed correction—an end to technocratic politics and a return to leadership focused on household prosperity.

The weeks ahead will test Babiš’s ability to turn his electoral win into a functioning government. Coalition talks are expected to be protracted, and the president retains the power to veto ministerial appointments. Whether this new chapter leads to greater stability or renewed confrontation will depend on how far Babiš is willing to compromise—and how united his potential allies prove to be once the governing begins.