The CNB comments on the July 2010 inflation figures
Inflation comes in slightly below the CNB forecast
According to figures released today, the price level increased by 1.9% year on year in July 2010. Headline inflation thus approached the CNB´ s target of 2%. However, monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, still remains below the lower boundary of the tolerance band for the inflation target, amounting to 0.7%.
Annual headline inflation was 0.1 percentage point lower in July 2010 than the CNB’ s current forecast. The deviation of the actual figure from the forecast was particularly due to lower-than-expected growth in regulated prices, which reflected a smaller increase in regulated rents and lower growth in natural gas prices. Within market prices, the deviations from the forecast were negligible, when slightly higher food prices were offset by modestly lower prices of other components.
For the third quarter of this year, the central bank´ s forecast expects a further-pick up in inflation, caused by a pick-up in regulated price growth and a return of food prices to annual growth. Conversely, the year-on-year increase in fuel prices should moderate. Core inflation - i.e. adjusted inflation excluding fuels - should continue to remain on a marked year-on-year decline. This reflects the anti-inflationary effect of import prices in past and the still subdued inflationary pressures from the domestic economy. The July data indicate, that the forecast for 2010 Q3 is so far materialising. In Q4 this year, the forecast expects a further rise in inflation to above the CNB´ s inflation target. However, at the beginning of the next year, inflation should fall back to the 2% inflation target, as the first-round effects of changes in indirect taxes in effect since January 2010 will unwind. Monetary-policy relevant inflation will grow gradually in the rest of this year and in the next year, approaching the inflation target in 2011 H2.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the July 2010 inflation figures
Inflation comes in slightly below the CNB forecast
According to figures released today, the price level increased by 1.9% year on year in July 2010. Headline inflation thus approached the CNB´ s target of 2%. However, monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, still remains below the lower boundary of the tolerance band for the inflation target, amounting to 0.7%.
Annual headline inflation was 0.1 percentage point lower in July 2010 than the CNB’ s current forecast. The deviation of the actual figure from the forecast was particularly due to lower-than-expected growth in regulated prices, which reflected a smaller increase in regulated rents and lower growth in natural gas prices. Within market prices, the deviations from the forecast were negligible, when slightly higher food prices were offset by modestly lower prices of other components.
For the third quarter of this year, the central bank´ s forecast expects a further-pick up in inflation, caused by a pick-up in regulated price growth and a return of food prices to annual growth. Conversely, the year-on-year increase in fuel prices should moderate. Core inflation - i.e. adjusted inflation excluding fuels - should continue to remain on a marked year-on-year decline. This reflects the anti-inflationary effect of import prices in past and the still subdued inflationary pressures from the domestic economy. The July data indicate, that the forecast for 2010 Q3 is so far materialising. In Q4 this year, the forecast expects a further rise in inflation to above the CNB´ s inflation target. However, at the beginning of the next year, inflation should fall back to the 2% inflation target, as the first-round effects of changes in indirect taxes in effect since January 2010 will unwind. Monetary-policy relevant inflation will grow gradually in the rest of this year and in the next year, approaching the inflation target in 2011 H2.
Tomáš Holub, Executive Director, Monetary and Statistics Department