The CNB comments on the July 2014 inflation figures
Inflation comes in slightly above CNB forecast in July
According to figures released today, the price level increased by 0.5% year on year in July 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes reached 0.3% year on year in July. Inflation was thus below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point higher in July 2014 than forecasted by the CNB. The deviation of July inflation from the forecast was due to higher annual dynamics in food prices and administered prices. Adjusted inflation excluding fuels was in line with the forecast, reflecting the weakening of the koruna at the end of last year and the already slightly inflationary effect of the domestic economy in 2014 Q3. The effects of changes to indirect taxes were also in line with the CNB forecast in July. Fuel prices were slightly below the forecast.
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 via higher import prices, but it has also contributed to a recovery in the domestic economy, which has started to have an inflationary effect. According to the CNB forecast, headline inflation will increase in the next few quarters owing to continued import price growth but the inflationary effect of growth in economic activity and wages will gradually prevail. Both headline and monetary-policy relevant inflation will thus gradually increase. Inflation will return to the CNB’s 2% target in the second half of 2015 and stay close to it in 2016. Overall, average inflation will be 0.4% this year, the lowest inflation rate in ten years, and increase to 1.8% and 2.1% respectively in the following two years, i.e. very close to the CNB’s target.
Petr Vojtíšek, Deputy Executive Director, Monetary and Statistics Department
The CNB comments on the July 2014 inflation figures
Inflation comes in slightly above CNB forecast in July
According to figures released today, the price level increased by 0.5% year on year in July 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes reached 0.3% year on year in July. Inflation was thus below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point higher in July 2014 than forecasted by the CNB. The deviation of July inflation from the forecast was due to higher annual dynamics in food prices and administered prices. Adjusted inflation excluding fuels was in line with the forecast, reflecting the weakening of the koruna at the end of last year and the already slightly inflationary effect of the domestic economy in 2014 Q3. The effects of changes to indirect taxes were also in line with the CNB forecast in July. Fuel prices were slightly below the forecast.
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 via higher import prices, but it has also contributed to a recovery in the domestic economy, which has started to have an inflationary effect. According to the CNB forecast, headline inflation will increase in the next few quarters owing to continued import price growth but the inflationary effect of growth in economic activity and wages will gradually prevail. Both headline and monetary-policy relevant inflation will thus gradually increase. Inflation will return to the CNB’s 2% target in the second half of 2015 and stay close to it in 2016. Overall, average inflation will be 0.4% this year, the lowest inflation rate in ten years, and increase to 1.8% and 2.1% respectively in the following two years, i.e. very close to the CNB’s target.
Petr Vojtíšek, Deputy Executive Director, Monetary and Statistics Department