The CNB comments on the April 2015 inflation figures
Inflation comes in slightly above CNB forecast in April
According to figures released today, the price level increased by 0.5% year on year in April 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 0.3% year on year in April. Inflation is thus still below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was slightly above the CNB’s expectations in April. This deviation was due chiefly to moderate annual growth in food prices (including alcoholic beverages and tobacco), whereas the CNB had expected a continuing – albeit weakening – decline. Unchanged at 1%, adjusted inflation excluding fuels was also slightly higher than forecasted in April. However, it decreased somewhat compared to the start of this year. The price developments in this consumer basket segment thus reflect the fact that the direct pass-through of the weakened exchange rate of the koruna to inflation through import prices is unwinding and inflation abroad remains very subdued. However, the exchange rate of the koruna is still contributing to growth in the domestic economy, which is conversely fostering higher prices. Administered prices also saw marginally stronger year-on-year growth than the CNB had expected. At the same time, the year-on-year drop in fuel prices was somewhat smaller than forecasted. By contrast, the effects of changes to indirect taxes were fully in line with the forecast in April 2015, reflecting on the one hand the two increases in excise duty on tobacco products last year and on the other hand the introduction of a second reduced VAT rate from January 2015.
The published data continue to confirm the opinion that the decision made in November 2013 to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation linked with a drop in demand. The CNB forecast expects that the growing economic activity and accelerating wage growth will continue to foster higher inflation, whereas import prices will slow inflation significantly this year. Both headline and monetary policy-relevant inflation will thus be close to zero in 2015. In 2016, they will rise to the CNB’s 2% target as the year-on-year fall in oil prices and the deflationary tendencies in the euro area dissipate.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the April 2015 inflation figures
Inflation comes in slightly above CNB forecast in April
According to figures released today, the price level increased by 0.5% year on year in April 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 0.3% year on year in April. Inflation is thus still below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was slightly above the CNB’s expectations in April. This deviation was due chiefly to moderate annual growth in food prices (including alcoholic beverages and tobacco), whereas the CNB had expected a continuing – albeit weakening – decline. Unchanged at 1%, adjusted inflation excluding fuels was also slightly higher than forecasted in April. However, it decreased somewhat compared to the start of this year. The price developments in this consumer basket segment thus reflect the fact that the direct pass-through of the weakened exchange rate of the koruna to inflation through import prices is unwinding and inflation abroad remains very subdued. However, the exchange rate of the koruna is still contributing to growth in the domestic economy, which is conversely fostering higher prices. Administered prices also saw marginally stronger year-on-year growth than the CNB had expected. At the same time, the year-on-year drop in fuel prices was somewhat smaller than forecasted. By contrast, the effects of changes to indirect taxes were fully in line with the forecast in April 2015, reflecting on the one hand the two increases in excise duty on tobacco products last year and on the other hand the introduction of a second reduced VAT rate from January 2015.
The published data continue to confirm the opinion that the decision made in November 2013 to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation linked with a drop in demand. The CNB forecast expects that the growing economic activity and accelerating wage growth will continue to foster higher inflation, whereas import prices will slow inflation significantly this year. Both headline and monetary policy-relevant inflation will thus be close to zero in 2015. In 2016, they will rise to the CNB’s 2% target as the year-on-year fall in oil prices and the deflationary tendencies in the euro area dissipate.
Tomáš Holub, Executive Director, Monetary Department