Česká národní banka

The CNB comments on the September 2018 inflation figures

9 Oct 2018

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

According to figures released today, annual inflation slowed to 2.3% in September. 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 2.2 % year on year in September.

Inflation was 0.2 percentage point below the CNB’s forecast in September. The contrary deviations from the forecast recorded by food prices and core inflation moderated. Those deviations had been pronounced in previous months and had been linked partly with movements in the prices of seasonal items in these two segments of the consumer basket. In addition, administered prices showed a downward deviation from the forecast in September. It was due to the introduction of bus and rail fare discounts for selected groups of the population, the price impact of which was larger than expected by the forecast. Conversely, annual growth in fuel prices was somewhat higher than expected in September. The first-round effects of changes to indirect taxes were in line with the forecast in September.

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 are linked primarily with buoyant wage growth in the domestic economy. The anti-inflationary effect of import prices has meanwhile disappeared, reflecting the recent depreciation of the koruna. However, the overall inflation pressures will ease in the period ahead due to continuing growth in interest rates, renewed appreciation of the koruna and slowing wage growth. Inflation will thus return to the CNB’s 2% target from above over the monetary policy horizon. During 2020, it will remain close to the target.

Tomáš Holub, Executive Director, Monetary Department