Česká národní banka

The CNB comments on the January 2018 inflation figures

14 Feb 2018

Inflation comes in slightly below the CNB’s forecast in January 2018

According to figures released today, annual inflation slowed to 2.2% in January. Inflation thus moved closer to the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.1% year on year in January.

Inflation was slightly below the CNB’s forecast in January. This was due solely to lower-than-forecasted core inflation. The other components of inflation deviated in the opposite direction, albeit to a small extent. Food prices and administered prices recorded faster-than-forecasted annual growth. Prices of fuels decreased, although slightly less than forecasted. The first-round effects of changes to indirect taxes were fully in line with the forecast in January.

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 in 2018 and return to it at the start of the monetary policy horizon. The overall inflation pressures remain strong, mainly reflecting accelerating 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. Domestic cost 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, which will mainly reflect a strengthening koruna this year. At the same time, the one-off factors that increased inflation last year will fully disappear. Inflation will be just below the CNB’s 2% target at the monetary policy horizon, i.e. in the first half of 2019.

Tomáš Holub, Executive Director, Monetary Department