Česká národní banka

The CNB comments on the May 2018 inflation figures

11 Jun 2018

Inflation comes in slightly above CNB forecast in May

According to figures released today, annual inflation stood at 2.2% in May. Inflation thus returned slightly above the CNB’s 2% target after several months below it. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.1% year on year in May.

Inflation came in slightly above CNB forecast in May. This deviation was due mainly to higher-than-forecasted annual growth in fuel and food prices. To a lesser extent, higher-than-expected core inflation also contributed to the deviation. Growth in administered prices and the first-round effects of changes to indirect taxes were in line with the CNB forecast in May.

The published figures represent a slight inflationary risk to the CNB’s current forecast, according to which domestic inflationary pressures remain strong, reflecting rapid wage growth amid buoyant growth of the Czech economy. These pressures will gradually ease, but the anti-inflationary effect of import prices will weaken as well. Import prices continue to reflect the previous strengthening of the koruna this year. According to the current forecast, inflation will be slightly below the target for the rest of the year. Next year, stable growth in foreign producer prices amid distinctly slower appreciation of the exchange rate will foster a renewed increase in import prices. Inflation will thus return very close to the 2% target at the monetary policy horizon, i.e. in the second and third quarters of next year.

Tomáš Holub, Executive Director, Monetary Department