The CNB comments on the December 2011 inflation figures
Inflation comes in well above CNB forecast in December 2011
According to figures released today, the price level increased by 2.4% year on year in December 2011. Headline inflation thus declined slightly compared to November. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, also edged down to 2.4% in December and is thus in the upper half of the tolerance band for the inflation target.
Annual headline inflation was 0.7 percentage point higher in December last year than the CNB’s current forecast. The upward deviation from the forecast was largely due to food prices. As the CNB stated in its comments on inflation in October and November 2011, the January 2012 increase in the reduced VAT rate very probably started to be partly reflected in food prices in advance in the last three months of last year. It is thus likely that the so far faster-than-expected food price growth will be offset somewhat at the start of this year, with inflation not likely to show such a sudden rise due to the VAT rate change as had been expected. Regulated prices and fuel prices were slightly higher in December last year than expected by the CNB. On the other hand, adjusted inflation excluding fuel prices was slightly lower than expected.
Overall, the data released represent an inflationary risk to the current CNB forecast, which, however, may not be pronounced if it is confirmed at the start of this year that the above advance pass-through of the VAT change to food prices took place in the run-up to Christmas. A closer look at the structure of inflation also confirms the assessment that the inflationary pressures from the domestic economy are not significant and that commodity and food prices – joined in recent months by the exchange rate – are still the main sources of inflation.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the December 2011 inflation figures
Inflation comes in well above CNB forecast in December 2011
According to figures released today, the price level increased by 2.4% year on year in December 2011. Headline inflation thus declined slightly compared to November. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, also edged down to 2.4% in December and is thus in the upper half of the tolerance band for the inflation target.
Annual headline inflation was 0.7 percentage point higher in December last year than the CNB’s current forecast. The upward deviation from the forecast was largely due to food prices. As the CNB stated in its comments on inflation in October and November 2011, the January 2012 increase in the reduced VAT rate very probably started to be partly reflected in food prices in advance in the last three months of last year. It is thus likely that the so far faster-than-expected food price growth will be offset somewhat at the start of this year, with inflation not likely to show such a sudden rise due to the VAT rate change as had been expected. Regulated prices and fuel prices were slightly higher in December last year than expected by the CNB. On the other hand, adjusted inflation excluding fuel prices was slightly lower than expected.
Overall, the data released represent an inflationary risk to the current CNB forecast, which, however, may not be pronounced if it is confirmed at the start of this year that the above advance pass-through of the VAT change to food prices took place in the run-up to Christmas. A closer look at the structure of inflation also confirms the assessment that the inflationary pressures from the domestic economy are not significant and that commodity and food prices – joined in recent months by the exchange rate – are still the main sources of inflation.
Tomáš Holub, Executive Director, Monetary and Statistics Department