Česká národní banka

The CNB comments on the December 2017 inflation figures

10 Jan 2018

Inflation comes in slightly below the CNB’s forecast in December 2017

According to figures released today, the price level increased by 2.4% year on year in December 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 2.3% year on year in December. The average inflation rate for 2017 as a whole was 2.5%.

Inflation was slightly below the CNB’s forecast in December. This was due mainly to slightly lower-than-expected core inflation. Lower annual growth in administered prices and food prices also contributed to the deviation from the forecast in the same direction, albeit to a very small extent. By contrast, the ongoing moderate annual growth in fuel prices somewhat exceeded the CNB’s expectations. The first-round effects of changes to indirect taxes were fully in line with the forecast in December.

Despite these minor deviations, the published data bear out the message of the CNB’s current forecast. According to the forecast, inflation will stay above the 2% target, though within its tolerance band, for most of this year. The overall inflation pressures remain pronounced, reflecting accelerated wage growth amid robust growth of the domestic economy. Growth in domestic costs will record a further short-term increase owing to labour market tightness. The domestic inflation pressures will then moderate, aided by a stabilising effect of monetary policy. However, they will continue to outweigh the anti-inflationary effect of import prices. Their decline will reflect a strengthening koruna amid a temporary weakening of foreign producer price inflation. At the same time, the one-off factors that increased inflation at the start of last year will subside. Inflation will thus return to the 2% target from above over the monetary policy horizon, i.e. in late 2018 and early 2019.

Tomáš Holub, Executive Director, Monetary Department