Česká národní banka

The CNB comments on the January 2012 inflation figures

16 Feb 2012

Inflation comes in slightly above the CNB’s forecast in January 2012

According to figures released today, the price level increased by 3.5% year on year in January 2012. Headline inflation thus increased significantly compared to December, mainly because of a rise in the reduced VAT rate from 10% to 14%. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, remained unchanged at 2.4% in January and is thus in the upper half of the tolerance band around the inflation target.

Annual headline inflation was 0.2 percentage point higher in January than the CNB’s current forecast. The upward deviation from the forecast was due to higher first-round effects of the tax changes and higher growth in food prices when adjusted for tax effects. The higher first-round effects of the tax changes reflect a change made to the consumer basket in January this year. The deviations of the other components of inflation from the forecast are – in the context of the revision to the consumer basket weights – negligible.

The published figures represent a weak inflationary risk to the CNB’s current forecast. The higher food prices suggest greater-than-forecasted impacts of the VAT change on these prices. However, core inflation – i.e. adjusted inflation excluding fuels – remains negative, confirming the overall message of the forecast. The forecast expects headline inflation to be just above 3% for most of 2012, but to fall below the CNB target (i.e. below 2%) in 2013.

Tomáš Holub, Executive Director, Monetary and Statistics Department