The CNB comments on the March 2014 inflation figures
Inflation remains exceptionally low and slightly below the CNB forecast in March
According to figures released today, the price level increased by 0.2% year on year in March 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes was unchanged year on year in March. Monetary-policy relevant inflation after rounding was thus zero and well below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point lower in March 2014 than forecasted by the CNB. The structure of inflation and its deviations from the CNB forecast did not differ much from the January and February figures. The deviation of inflation from the forecast in March was due above all to a deeper-than-expected year-on-year fall in administered prices already given by the developments in January this year. Lower-than-expected fuel prices acted in the same direction. By contrast, food prices continued to rise somewhat faster year on year in March than expected by the CNB. Adjusted inflation excluding fuels was fully in line with the forecast. Prices in this category of goods and services have long been falling, but are now declining only slightly, reflecting the fading anti-inflationary effect of the domestic economy, including very slow wage growth in the business sector last year. The effects of changes to indirect taxes were also in line with the forecast in March.
The published data confirm the CNB’s opinion that the decision made in November to start using the exchange rate as an additional monetary policy instrument significantly contributed to averting the threat of deflation. At the start of 2014, owing to the unwinding of the effects of VAT changes and amid falling administered prices, headline inflation decreased to very low – but positive – values. The domestic economy remains anti-inflationary for the time being, whereas the weakened koruna is having the opposite effect. According to the current forecast, inflation will pick up pace in the course of this year, returning towards the Czech National Bank’s target of 2% at the end of the year. This will initially reflect rising import prices connected with the weakening of the koruna. Starting in the second half of this year, consumer price inflation will also be strongly affected by an economic recovery and faster wage growth. Thanks to renewed growth in administered prices, headline inflation will reach the upper half of the tolerance band at the monetary policy horizon and then return from above to the target, where it should stabilise. According to the forecast, inflation will be 1.2% on average this year, the second-lowest inflation rate in ten years, and 1.9% overall for this year and the next, i.e. on average it will be just below the 2% target.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the March 2014 inflation figures
Inflation remains exceptionally low and slightly below the CNB forecast in March
According to figures released today, the price level increased by 0.2% year on year in March 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes was unchanged year on year in March. Monetary-policy relevant inflation after rounding was thus zero and well below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point lower in March 2014 than forecasted by the CNB. The structure of inflation and its deviations from the CNB forecast did not differ much from the January and February figures. The deviation of inflation from the forecast in March was due above all to a deeper-than-expected year-on-year fall in administered prices already given by the developments in January this year. Lower-than-expected fuel prices acted in the same direction. By contrast, food prices continued to rise somewhat faster year on year in March than expected by the CNB. Adjusted inflation excluding fuels was fully in line with the forecast. Prices in this category of goods and services have long been falling, but are now declining only slightly, reflecting the fading anti-inflationary effect of the domestic economy, including very slow wage growth in the business sector last year. The effects of changes to indirect taxes were also in line with the forecast in March.
The published data confirm the CNB’s opinion that the decision made in November to start using the exchange rate as an additional monetary policy instrument significantly contributed to averting the threat of deflation. At the start of 2014, owing to the unwinding of the effects of VAT changes and amid falling administered prices, headline inflation decreased to very low – but positive – values. The domestic economy remains anti-inflationary for the time being, whereas the weakened koruna is having the opposite effect. According to the current forecast, inflation will pick up pace in the course of this year, returning towards the Czech National Bank’s target of 2% at the end of the year. This will initially reflect rising import prices connected with the weakening of the koruna. Starting in the second half of this year, consumer price inflation will also be strongly affected by an economic recovery and faster wage growth. Thanks to renewed growth in administered prices, headline inflation will reach the upper half of the tolerance band at the monetary policy horizon and then return from above to the target, where it should stabilise. According to the forecast, inflation will be 1.2% on average this year, the second-lowest inflation rate in ten years, and 1.9% overall for this year and the next, i.e. on average it will be just below the 2% target.
Tomáš Holub, Executive Director, Monetary and Statistics Department