Česká národní banka

The CNB comments on the August 2018 inflation figures

10 Sep 2018

Inflation comes in slightly below CNB forecast in August

According to figures released today, annual inflation accelerated to 2.5% in August. It 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 2.4% year on year in August.

Inflation was 0.1 percentage point below the CNB’s forecast in August. This was due to the evolution of food prices in July, when their growth declined sharply. In August, the deviation of food price inflation from the forecast moderated. Core inflation increased slightly further in August, exceeding the CNB’s expectations. This segment of consumer prices continues to reflect the growth of the domestic economy and accelerating wage growth. The forecast for administered prices, fuel prices and the first-round effects of changes to indirect taxes was in line with the forecast overall in August.

The released figures bear out the message of the CNB’s current forecast. According to the forecast, the overall fundamental inflation pressures are strong and will increase further in the short term, particularly in connection with buoyant wage growth in the domestic economy. At the same time, the anti-inflationary effect of import prices is fading, reflecting the recent depreciation of the koruna. However, the overall inflation pressures will ease in the following period. This will be due to continuing growth in interest rates, renewed appreciation of the koruna and slower wage growth. Inflation will thus return to the CNB’s 2% target from above at the monetary policy horizon. During 2020, it will stay close to the target.

Tomáš Holub, Executive Director, Monetary Department