Czech inflation accelerated from 1.5% yoy in June to 1.7% yoy in July. This was in line with both the market consensus and the CNB forecast, while our estimate was slightly higher at 1.8% yoy.

Czech inflation accelerated from 1.5% yoy in June to 1.7% yoy in July. This was in line with both the market consensus and the CNB forecast, while our estimate was slightly higher at 1.8% yoy.

Higher fuel prices were one of the factors behind the uptick in inflation. While prices at domestic petrol stations fell by 8.2% mom in June, they rebounded by 3.5% mom in July. This reflected the renewed escalation of the conflict in the Middle East, which pushed crude oil prices higher. As a result, year-on-year fuel price growth in Czechia accelerated from 14.7% to 16.8% in July. The restoration of the higher excise duty on diesel also contributed to the increase.

The deviation from our forecast was mainly driven by food prices, which continue to decline. Prices of food and non-alcoholic beverages, as well as alcoholic drinks and tobacco, both fell by 0.4% mom in July. While food and non-alcoholic beverage prices remained 3.1% lower than a year earlier, prices of alcoholic drinks and tobacco were 3.7% higher. Food price developments therefore remain supportive from an inflation perspective, despite rising costs associated with the Middle East conflict, and continue to exert downward pressure on headline inflation.

Household energy prices, with the exception of heating prices, continued to edge lower. Electricity prices declined by 0.1% mom in July and were 11.4% lower than a year earlier. The year-on-year comparison continues to be affected by the transfer of renewable energy payments to the state budget introduced at the beginning of this year. Gas prices fell by 0.3% mom and were 5.0% lower yoy. By contrast, heating prices continued to rise modestly, increasing by 0.3% mom and 1.5% yoy. Looking ahead, we expect higher wholesale energy prices resulting from the Middle East conflict to gradually feed into household tariffs as the new heating season begins. The impact should, however, be mitigated by the high share of households with fixed-price energy contracts.

Core inflation also increased, driven primarily by faster rent growth. Core inflation rose from 2.8% yoy in June to 3.0% yoy in July, roughly 0.1pp above both our estimate and the CNB forecast. In seasonally adjusted month-on-month terms, core inflation momentum strengthened from 0.2% to 0.3%, according to our estimates. This was largely due to an acceleration in services inflation from 4.5% to 4.7% yoy, with monthly services price growth of 1.6% standing above historical norms for July. Both rent components continued to record strong and accelerating growth. Imputed rents accelerated from 5.2% to 5.7% yoy in July, while paid rents accelerated from 5.9% to 6.1% yoy. This reflects the continued strong increase in property prices, which is keeping home ownership financially out of reach for many households and supporting demand for rented accommodation. Housing costs are also being pushed up by higher prices for construction work and building materials. Seasonal factors also contributed, with holiday prices rising by 23% mom, matching the increase recorded in July 2025.

We expect inflation to continue rising over the remainder of the year. We forecast it to approach 3% yoy by year-end, reflecting the gradual pass-through of the second-round effects of the Middle East conflict to a broader range of prices in the economy. So far, the effects have been visible primarily in fuel prices. For 2026 as a whole, we estimate inflation to average 2.1%. In early 2027, annual inflation is likely to temporarily exceed the 3% upper limit of the CNB’s tolerance band, peaking at 3.4% in February. However, this is likely to largely reflect a low comparison base. As the base effect fades, inflation should fall back below 3% yoy in March. For 2027 as a whole, we forecast average inflation of 2.6%.

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

CEZ announced its results for 2Q26, with net profit rising by +8% yoy, but falling short of market expectations. This was primarily due to the revaluation of trading instruments. Conversely, CEZ increased output at its nuclear and coal-fired power stations, while its Distribution division also performed better. CEZ also demonstrated a strong ability to generate free cash flow (WFT-free). The company's management has raised its FY targets for both EBITDA and net profit.  

Revenue for the second quarter totaled CZK74.7bn. This represents a slight yoy increase of +0.8%. However, EBITDA fell by 23% yoy to CZK23.8bn. This is 8.7% below the consensus estimate. As expected, the decline in EBITDA was negatively impacted by lower electricity prices, which affected the Generation segment. This sector also recorded a loss from Trading where positions were revalued. However, Mining and Distribution both saw yoy growth. Net profit, adjusted for exceptional items and non-controlling interests, increased by +8% yoy to CZK4.3bn. As anticipated, this growth was driven by a substantial decrease in the effective tax rate, due to the absence of a special tax (WFT).

The leverage ratio, measured as net debt to EBITDA, remained unchanged at 1.6x on a quarterly basis. However, both debt and cash increased due to the dividend payment in August.

Guidance for 2026: CEZ has once again increased its targets for this year. This is based on higher electricity prices, which are set to rise to EUR106–110MWh (previously EUR104–108MWh), higher output from nuclear power stations, and higher profits in the Distribution sector. According to the new forecast, EBITDA is expected to reach CZK109–114bn (+1.8% compared to the previous forecast of CZK107–112bn), while net profit is expected to reach CZK31–35bn (+3.1% compared to the previous forecast of CZK30–34bn).

According to our model, EBITDA should total CZK112.5bn, while net profit should total CZK37.4bn. The market is expecting CZK112.6bn and CZK36.8bn respectively.

The results reported for 1H26 represent 53% of CEZ’s revised full-year target for EBITDA and 54% for net profit (mid-range).

Compared with previous expectations, the estimated output from the gas-fired power station and the nuclear units has increased. Conversely, the outlook for renewable energy sources has been revised downwards.