Česká národní banka

The CNB comments on the June 2018 inflation figures

11 Jul 2018

Inflation comes in well above CNB forecast in June

According to figures released today, annual inflation accelerated further to 2.6% in June. Inflation remains in the upper half of the tolerance band around the 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.5% year on year in June.

In June, inflation was above the CNB forecast published in early May (0.7 percentage point higher). This was due to a combination of upward deviations from the forecast for all consumer basket items (except for the first-round effects of changes to indirect taxes, which were in line with the forecast). Higher-than-expected year-on-year growth in prices of fuel and food, i.e. two traditionally volatile items, accounted for more than two-thirds of the total deviation. The remainder of the deviation was due to slightly higher-than-forecasted core inflation and year-on-year growth in administered prices.

The published figures represent an inflationary risk to the CNB’s current forecast. According to the forecast, domestic inflation pressures remain strong. They reflect 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. The effect of the previous strengthening of the koruna is currently fading rapidly. The observed reversal in the exchange rate from appreciation to weaker levels is another major inflationary risk to the CNB’s current forecast which the Bank Board took into account in its June decision to increase monetary-policy interest rates.

Tomáš Holub, Executive Director, Monetary Department