The CNB comments on the December 2015 inflation figures
Inflation comes in significantly below CNB forecast in December
According to figures released today, the price level increased by 0.1% year on year in December 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes were flat year on year in December. Inflation is thus still well below the CNB’s target, or below the lower boundary of the tolerance band around the target.
Annual headline inflation was 0.7 percentage point lower in December than forecasted by the CNB. This substantial deviation was predominantly due to food prices, which resumed their annual decline in 2015 Q4, whereas the CNB had expected accelerating growth. A deeper-than-forecasted annual decline in fuel prices and administered prices acted in the same direction, albeit to a noticeably lesser extent. The drop in fuel prices reflects a further decline in oil prices on world markets which had not been foreseen by the forecast. Slightly higher-than-expected adjusted inflation excluding fuels, which increased moderately in December compared to previous months, affected the deviation from the forecast in the opposite direction. At the end of last year, this indicator of core inflation continued to be affected by growth of the domestic economy and wages and by depreciation of the koruna against the dollar. However, these effects were largely offset by a continued decline in foreign producer prices. The impacts of indirect tax changes were in line with the forecast.
The released data confirm low inflation in the Czech economy last year. The low-inflation environment, moreover, is lasting for longer than expected. The average inflation rate for 2015 was 0.3%, the lowest level since 2003. According to the CNB forecast, inflation will gradually increase, hitting the 2% target at the monetary policy horizon and being slightly above it in 2017. This will reflect an unwinding of the anti-inflationary effect of import prices, which are currently decreasing due to a fall in producer prices in the euro area and in global commodity prices. Import prices will be slightly inflationary in the second half of this year. The growing domestic economy will foster higher costs and consequently higher consumer prices over the entire forecast horizon, mainly via accelerating wage growth and rising prices of other inputs.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the December 2015 inflation figures
Inflation comes in significantly below CNB forecast in December
According to figures released today, the price level increased by 0.1% year on year in December 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes were flat year on year in December. Inflation is thus still well below the CNB’s target, or below the lower boundary of the tolerance band around the target.
Annual headline inflation was 0.7 percentage point lower in December than forecasted by the CNB. This substantial deviation was predominantly due to food prices, which resumed their annual decline in 2015 Q4, whereas the CNB had expected accelerating growth. A deeper-than-forecasted annual decline in fuel prices and administered prices acted in the same direction, albeit to a noticeably lesser extent. The drop in fuel prices reflects a further decline in oil prices on world markets which had not been foreseen by the forecast. Slightly higher-than-expected adjusted inflation excluding fuels, which increased moderately in December compared to previous months, affected the deviation from the forecast in the opposite direction. At the end of last year, this indicator of core inflation continued to be affected by growth of the domestic economy and wages and by depreciation of the koruna against the dollar. However, these effects were largely offset by a continued decline in foreign producer prices. The impacts of indirect tax changes were in line with the forecast.
The released data confirm low inflation in the Czech economy last year. The low-inflation environment, moreover, is lasting for longer than expected. The average inflation rate for 2015 was 0.3%, the lowest level since 2003. According to the CNB forecast, inflation will gradually increase, hitting the 2% target at the monetary policy horizon and being slightly above it in 2017. This will reflect an unwinding of the anti-inflationary effect of import prices, which are currently decreasing due to a fall in producer prices in the euro area and in global commodity prices. Import prices will be slightly inflationary in the second half of this year. The growing domestic economy will foster higher costs and consequently higher consumer prices over the entire forecast horizon, mainly via accelerating wage growth and rising prices of other inputs.
Tomáš Holub, Executive Director, Monetary Department