The CNB comments on the March 2015 inflation figures
Inflation comes in slightly above CNB forecast in March
According to figures released today, the price level increased by 0.2% year on year in March 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes were flat year on year in March. Inflation is thus still well below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was slightly above the CNB’s expectations in March. As in the previous two months, administered prices saw a moderate year-on-year increase in March, whereas the forecast had predicted a slight year-on-year decrease. A less pronounced year-on-year decline in fuel prices than expected also fostered higher-than-forecasted inflation in the period under review. Conversely, food prices recorded a slightly stronger year-on-year decrease in March than forecasted. Adjusted inflation excluding fuels was also slightly lower in March than expected by the forecast. The slightly slower price growth in this consumer basket segment reflects the fact that the pass-through of the weakened exchange rate of the koruna to inflation through import prices is unwinding and inflation abroad remains very subdued. However, the exchange rate of the koruna is still contributing to growth of the domestic economy, which in turn is fostering higher prices. The effects of changes to indirect taxes were fully in line with the CNB forecast in March 2015, reflecting on the one hand the two increases in excise duty on tobacco products last year and on the other hand the introduction of a second reduced VAT rate.
The published data continue to confirm the opinion that the decision made in November 2013 to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation linked with a drop in demand. The current CNB forecast expects both headline and monetary policy-relevant inflation to be around zero or slightly negative in the rest of 2015 and then rise to the 2% target in 2016. The overall upward pressures on consumer prices are currently fading away, as a decline in producer prices in the euro area combined with a fall in global prices of energy commodities is leading to a significant reduction in costs stemming from import prices. Their anti-inflationary effect will fade in early 2016. By contrast, continuing growth in domestic economic activity and gradually accelerating wage growth will foster higher prices over the entire forecast horizon.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the March 2015 inflation figures
Inflation comes in slightly above CNB forecast in March
According to figures released today, the price level increased by 0.2% year on year in March 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes were flat year on year in March. Inflation is thus still well below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was slightly above the CNB’s expectations in March. As in the previous two months, administered prices saw a moderate year-on-year increase in March, whereas the forecast had predicted a slight year-on-year decrease. A less pronounced year-on-year decline in fuel prices than expected also fostered higher-than-forecasted inflation in the period under review. Conversely, food prices recorded a slightly stronger year-on-year decrease in March than forecasted. Adjusted inflation excluding fuels was also slightly lower in March than expected by the forecast. The slightly slower price growth in this consumer basket segment reflects the fact that the pass-through of the weakened exchange rate of the koruna to inflation through import prices is unwinding and inflation abroad remains very subdued. However, the exchange rate of the koruna is still contributing to growth of the domestic economy, which in turn is fostering higher prices. The effects of changes to indirect taxes were fully in line with the CNB forecast in March 2015, reflecting on the one hand the two increases in excise duty on tobacco products last year and on the other hand the introduction of a second reduced VAT rate.
The published data continue to confirm the opinion that the decision made in November 2013 to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation linked with a drop in demand. The current CNB forecast expects both headline and monetary policy-relevant inflation to be around zero or slightly negative in the rest of 2015 and then rise to the 2% target in 2016. The overall upward pressures on consumer prices are currently fading away, as a decline in producer prices in the euro area combined with a fall in global prices of energy commodities is leading to a significant reduction in costs stemming from import prices. Their anti-inflationary effect will fade in early 2016. By contrast, continuing growth in domestic economic activity and gradually accelerating wage growth will foster higher prices over the entire forecast horizon.
Tomáš Holub, Executive Director, Monetary Department