Česká národní banka

The CNB comments on the August 2017 inflation figures

11 Sep 2017

Inflation comes in slightly below the CNB forecast in August 2017.

According to figures released today, the price level increased by 2.5% year on year in August 2017. Inflation thus remains in the upper half of the tolerance band around the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.6% year on year in August.

Annual headline inflation was slightly below the CNB’s forecast in August. The slight downward deviation was due to lower-than-expected annual food price inflation. By contrast, the increase in fuel prices was somewhat faster than forecasted by the CNB. Price developments in the remaining consumer basket items were in line with the forecast.

The published data bear out the message of the CNB’s current forecast. According to the forecast, inflation will remain in the upper half of the tolerance band around the CNB’s target in the remainder of this year. Inflation pressures are currently peaking, reflecting accelerating growth in wages and economic activity. These domestic fundamental factors primarily affect core inflation. Growth in domestic costs will slow in the period ahead due to rising labour productivity growth, which will increasingly offset the impact of faster growth in wages and economic activity. The current already only slightly inflationary effect of import prices will quickly turn anti-inflationary. This will reflect subdued foreign producer price inflation and a strengthening koruna. Inflation will thus decrease towards the Czech National Bank’s 2% target in early 2018 and will be slightly below it over the monetary policy horizon, i.e. in 2018 Q3 and Q4. Core inflation will be stable, fluctuating around 2%.

Tomáš Holub, Executive Director, Monetary Department