The CNB comments on the December 2016 inflation figures
Inflation returns to the CNB’s target in December 2016 after four years
According to figures released today, the price level increased by 2% year on year in December 2016. After having fluctuated below the CNB’s target for four years, inflation thus returned to the 2% target at the very end of last year. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 1.9% year on year in December 2016.
Annual headline inflation was 0.7 percentage point higher in December than forecasted by the CNB. The first reason was – as in November – faster-than-expected growth in food prices. In addition, higher-than-expected adjusted inflation excluding fuels, which rose noticeably in December, contributed to the aforementioned deviation from the forecast to roughly the same extent. This indicator of core inflation has been reflecting the positive effect of continued growth in the domestic economy and accelerating wage growth for some time now. In December, moreover, this was accompanied by the price impacts of the introduction of electronic registration of sales in accommodation and food services, whose contribution to headline inflation can be estimated at 0.1–0.2 percentage point. By contrast, a small deviation from the inflation forecast in the opposite direction was recorded by administered prices and to a very small extent also fuel prices.
The 2% target was achieved earlier than forecasted by the CNB. However, the faster-than-forecasted growth in inflation at the end of last year can be considered a consequence of one-off effects stemming from traditionally volatile prices of some foodstuffs and the introduction of electronic registration of sales in food and accommodation services. The inflationary impact of those factors on year-on-year price growth will disappear at the end of this year. Moreover, a further drop in administered prices of gas for households, not expected by the current forecast, will act in the opposite direction this year. At the same time, the message of the CNB’s forecast remains valid as regards the fundamental inflation factors. Domestic costs will continue to rise apace over the entire forecast horizon due to rising wages and price of capital amid continued growth in economic activity. At the same time, the anti-inflationary effect of import prices, stemming from a fall in producer prices in the euro area, is disappearing quickly. According to the CNB’s current forecast – assuming the use of the exchange rate as a monetary policy instrument until mid-2017 – inflation will thus slightly exceed the CNB’s 2% target at the monetary policy horizon.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the December 2016 inflation figures
Inflation returns to the CNB’s target in December 2016 after four years
According to figures released today, the price level increased by 2% year on year in December 2016. After having fluctuated below the CNB’s target for four years, inflation thus returned to the 2% target at the very end of last year. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 1.9% year on year in December 2016.
Annual headline inflation was 0.7 percentage point higher in December than forecasted by the CNB. The first reason was – as in November – faster-than-expected growth in food prices. In addition, higher-than-expected adjusted inflation excluding fuels, which rose noticeably in December, contributed to the aforementioned deviation from the forecast to roughly the same extent. This indicator of core inflation has been reflecting the positive effect of continued growth in the domestic economy and accelerating wage growth for some time now. In December, moreover, this was accompanied by the price impacts of the introduction of electronic registration of sales in accommodation and food services, whose contribution to headline inflation can be estimated at 0.1–0.2 percentage point. By contrast, a small deviation from the inflation forecast in the opposite direction was recorded by administered prices and to a very small extent also fuel prices.
The 2% target was achieved earlier than forecasted by the CNB. However, the faster-than-forecasted growth in inflation at the end of last year can be considered a consequence of one-off effects stemming from traditionally volatile prices of some foodstuffs and the introduction of electronic registration of sales in food and accommodation services. The inflationary impact of those factors on year-on-year price growth will disappear at the end of this year. Moreover, a further drop in administered prices of gas for households, not expected by the current forecast, will act in the opposite direction this year. At the same time, the message of the CNB’s forecast remains valid as regards the fundamental inflation factors. Domestic costs will continue to rise apace over the entire forecast horizon due to rising wages and price of capital amid continued growth in economic activity. At the same time, the anti-inflationary effect of import prices, stemming from a fall in producer prices in the euro area, is disappearing quickly. According to the CNB’s current forecast – assuming the use of the exchange rate as a monetary policy instrument until mid-2017 – inflation will thus slightly exceed the CNB’s 2% target at the monetary policy horizon.
Tomáš Holub, Executive Director, Monetary Department