Česká národní banka

The CNB comments on the November 2018 inflation figures

10 Dec 2018

Inflation comes in below CNB forecast in November

According to figures released today, annual inflation slowed to 2% in November. Inflation is thus at the CNB’s target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 1.9% year on year in November.

Inflation was 0.5 percentage point below the CNB’s forecast in November. This deviation was due mainly to an unexpectedly rapid fade-out of the previous growth in food prices. Lower annual administered price inflation and fuel price inflation, which has started to reflect the significant decline in oil prices on global markets, acted in the same direction, although to a much lesser extent. Conversely, core inflation was slightly higher than forecasted in November. The first-round effects of changes to indirect taxes were in line with the forecast.

The published figures represent an anti-inflationary risk to the CNB’s current forecast. According to the forecast, the overall fundamental inflation pressures in the domestic economy remain strong, owing mainly to buoyant wage growth and continued growth of the real economy. These factors are primarily affecting core inflation. At the same time, the inflationary effect of import prices was restored, reflecting rapid growth in foreign prices and the weakened exchange rate of the koruna. At the start of next year, inflation will increase into the upper half of the tolerance band around the CNB’s target due to a rise in core inflation, a renewed recovery in food price inflation and faster growth in administered prices. In the subsequent period, however, the overall inflation pressures will ease owing to growth in interest rates, renewed appreciation of the koruna and a gradual slowdown in wage growth. Inflation will therefore approach the CNB’s 2% target from above over the monetary policy horizon and stay at the target during 2020.

Petr Král, Executive Director, Monetary Department