The CNB comments on the May 2014 inflation figures
Inflation comes in slightly below the CNB forecast in May
According to figures released today, the price level increased by 0.4% year on year in May 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes reached 0.2% year on year in May. Inflation was thus still below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point lower in May 2014 than forecasted by the CNB. The slight deviation of inflation from the forecast in May was due to lower-than-expected annual food price inflation. By contrast, adjusted inflation excluding fuels was slightly higher than forecasted. Its gradual growth reflects the weakening of the koruna at the end of last year and the subsiding anti-inflationary effect of the domestic economy. The effects of changes to indirect taxes were in line with the CNB forecast in May. The same is also largely true of administered prices and fuel prices.
The published data continue to confirm the CNB’s opinion that the decision made in November to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation. The weakened exchange rate has so far been feeding through to inflation mainly through higher import prices, but it has also contributed to a recovery of the domestic economy and thereby an unwinding of its anti-inflationary effect. According to the CNB forecast, headline inflation will increase in the next few quarters owing to continued import price growth. In the longer term, it will start to reflect growth in economic activity and wages. At the start of 2015 headline inflation will thus get just above the CNB’s 2% target. Monetary-policy relevant inflation will return to the target and stay very close to it at the monetary policy horizon. Overall, average inflation will be 0.8% this year, the lowest inflation rate in ten years, and increase to 2.2% next year, i.e. just above the CNB’s target.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the May 2014 inflation figures
Inflation comes in slightly below the CNB forecast in May
According to figures released today, the price level increased by 0.4% year on year in May 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes reached 0.2% year on year in May. Inflation was thus still below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point lower in May 2014 than forecasted by the CNB. The slight deviation of inflation from the forecast in May was due to lower-than-expected annual food price inflation. By contrast, adjusted inflation excluding fuels was slightly higher than forecasted. Its gradual growth reflects the weakening of the koruna at the end of last year and the subsiding anti-inflationary effect of the domestic economy. The effects of changes to indirect taxes were in line with the CNB forecast in May. The same is also largely true of administered prices and fuel prices.
The published data continue to confirm the CNB’s opinion that the decision made in November to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation. The weakened exchange rate has so far been feeding through to inflation mainly through higher import prices, but it has also contributed to a recovery of the domestic economy and thereby an unwinding of its anti-inflationary effect. According to the CNB forecast, headline inflation will increase in the next few quarters owing to continued import price growth. In the longer term, it will start to reflect growth in economic activity and wages. At the start of 2015 headline inflation will thus get just above the CNB’s 2% target. Monetary-policy relevant inflation will return to the target and stay very close to it at the monetary policy horizon. Overall, average inflation will be 0.8% this year, the lowest inflation rate in ten years, and increase to 2.2% next year, i.e. just above the CNB’s target.
Tomáš Holub, Executive Director, Monetary and Statistics Department