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CNB > Economic research > Research publications > Research and Policy Notes > 2017 > Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech National Bank’s Approach

Should Inflation Measures Used by Central Banks Incorporate House Prices? The Czech National Bank’s Approach

Mojmír Hampl, Tomáš Havránek

In this note we describe the Czech National Bank’s approach to incorporating macroprudential considerations into monetary policy decision making: the use of a broader inflation measure that gives substantial weight to house prices and is considered along with headline CPI inflation. We argue that, in terms of theory, the broader inflation gauge is at least as suitable for measuring the value of money as headline CPI inflation is, but we also acknowledge practical problems that arise from the use of the broader index.

JEL codes: E31, E44, E50, R30

Keywords: Consumer price index, financial stability, house prices, macroprudential policy, monetary policy, owner-occupied housing

Issued: June 2017

Download: RPN No. 1/2017 (pdf, 209 kB)