Czech inflation fell surprisingly sharply in May from 2.5% to 2.1% yoy. This was below our estimate and the market consensus, both at 2.3% yoy. While headline inflation was 0.1pp above the CNB forecast in April, it aligned with the central bank’s expectation in May. Annual inflation surprised on the downside also in other Central European countries, including Poland (a decline from 3.2% to 3.1% yoy compared with an expected 3.6%) and Hungary (a drop from 2.1% to 1.8% yoy compared with an estimated 2.2%).

Czech inflation fell surprisingly sharply in May from 2.5% to 2.1% yoy. This was below our estimate and the market consensus, both at 2.3% yoy. While headline inflation was 0.1pp above the CNB forecast in April, it aligned with the central bank’s expectation in May. Annual inflation surprised on the downside also in other Central European countries, including Poland (a decline from 3.2% to 3.1% yoy compared with an expected 3.6%) and Hungary (a drop from 2.1% to 1.8% yoy compared with an estimated 2.2%).

Food prices rose on the month but were still lower than a year ago. In May, the price of food and non-alcoholic beverages increased by 0.6% mom, while the price of alcoholic beverages and tobacco edged up by 0.1% mom. However, the annual decline in food and non-alcoholic beverage prices accelerated from 1.3% in April to 1.9% in May. Although alcohol and tobacco prices rose by 3.7% yoy, this growth also slowed from 5.2% yoy in April. The slowdown in food prices was significantly influenced by the base effect due to the different timing of Easter and the associated traditional food discounts. The lingering impact of last year’s strong agricultural harvest likely also contributed to the continued year-on-year decline in food and non-alcoholic beverage prices. We estimate that lower annual food price growth contributed 0.2-0.3pp to a reduction in headline inflation in May. However, the mom increase in food prices in May may already have reflected higher fuel costs.

Fuel, electricity and gas prices declined slightly in May. On average, fuel prices were lower by 0.6% mom. While diesel prices fell in May, petrol prices increased. However, the annual fuel price growth accelerated further, from 24.5% in April to 26.3% in May. This was influenced by a low comparison base, given that fuel prices had fallen significantly the previous spring. Other household energy prices continued their downward trend, with electricity prices dropping by 0.1% mom in May and gas prices by 0.5% mom (similar declines were observed in March and April). The exception was the price of heat and hot water supplies, which rose by 0.2% mom in May, following a 0.9% mom increase in April. Overall, regulated prices remained flat mom in May and were 1.5% lower yoy.

Core inflation remained at 2.9% yoy in May, as in March and April. This was 0.1pp higher than the CNB forecast but 0.1pp lower than our estimate. In seasonally adjusted mom terms, we estimate that core inflation slowed from 0.3% to 0.2%. However, the three-month moving average of this indicator remained broadly unchanged at an elevated 0.3%. Annual growth slowed in May for both services (from 4.8% to 4.7% yoy) and goods (from 1.1% to 0.6% yoy; including food and energy prices). Imputed rent growth eased from 5.5% yoy in April to 5.3% yoy in May, though the momentum was strong at +0.7% mom. This may have reflected the continued rise in property prices, as well as renewed growth in the prices of building materials. Paid rents accelerated from 6.3% to 6.5% yoy in May. Excluding both rent components, core inflation fell from 1.9% to 1.8% yoy, meaning that housing prices remain the main factor behind its persistently elevated level. By contrast, the recreation, sport and culture category showed relatively weak price growth among the items included in core inflation. Package holiday prices fell by 0.9% mom in May, which is slightly less than in May 2025, when the decline reached 1.2% mom. However, this was accompanied by falls in the prices of consumer goods such as sports and garden equipment.

Inflation in May eased the pressure on the CNB to raise interest rates immediately, though this pressure is likely to persist in the coming months. In recent days, financial markets have begun to fully price in a 25bp rate hike as early as the central bank’s next meeting on 18 June. However, the data released today eases the pressure on the central bank, as headline inflation has returned close to the CNB’s 2% target and core inflation has remained below the 3% upper limit of its tolerance band. Nevertheless, a rate hike by the CNB in the second half of the year cannot be ruled out. The Czech economy is supported by strong domestic fundamentals, including robust consumer demand and rapid wage growth. Fiscal policy is also likely to provide further domestic inflationary impulse in the coming months. Added to this are increased price pressures from abroad linked to the conflict in the Middle East. This has led to a significant rise in wholesale prices for energy, selected production inputs (including construction materials) and agricultural fertilisers, as well as a partial disruption to supply chains.

We expect inflation to average 2.3-2.4% this year and increase to 2.8% next year. Due to the ongoing conflict in the Middle East, however, risks remain skewed towards even higher inflation. According to our forecast, headline inflation should peak in the first two months of next year, approaching 4% yoy. Nevertheless, this will mainly be due to the low base effect from the start of this year, when inflation was well below 2% yoy.

As of today, Friday, June 5, 2026, Philip Morris ČR shares are trading ex-dividend from profits earned in 2025.

At the Annual General Meeting on May 29, 2026, shareholders approved a dividend of CZK1,100 per share. This corresponds to the distribution of all net profits from 2025.

The dividend offers a gross yield of +5.6%.

As of today, Friday, June 5, 2026, Philip Morris ČR shares are trading ex-dividend from profits earned in 2025.

At the Annual General Meeting on May 29, 2026, shareholders approved a dividend of CZK1,100 per share. This corresponds to the distribution of all net profits from 2025.

The dividend offers a gross yield of +5.6%.