The CNB comments on the February 2014 inflation figures
Inflation remains exceptionally low and slightly below the CNB forecast in February
According to figures released today, the price level increased by 0.2% year on year in February 2014. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, was 0.1% year on year in February. This means it was still well below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point lower in February 2014 than forecasted by the CNB. The inflation structure and its deviation from the CNB forecast did not differ much from the January figures. The deviation of inflation from the forecast in February was due to a deeper-than-expected annual decline in administered prices. A slightly stronger annual decline in prices in the adjusted inflation excluding fuels segment acted in the same direction. Prices in this category of goods and services have long been falling, reflecting the persisting sharp downturn in the domestic economy, including very slow wage growth in the business sector. By contrast, food prices rose rather faster year on year in February than expected by the CNB, but the deviation was smaller than in January. The effects of changes to indirect taxes and fuel prices were in line with the CNB’s expectations in February.
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. Inflation will pick up pace in the course of this year, returning towards the CNB’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. Inflation will reach 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 February 2014 inflation figures
Inflation remains exceptionally low and slightly below the CNB forecast in February
According to figures released today, the price level increased by 0.2% year on year in February 2014. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, was 0.1% year on year in February. This means it was still well below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.2 percentage point lower in February 2014 than forecasted by the CNB. The inflation structure and its deviation from the CNB forecast did not differ much from the January figures. The deviation of inflation from the forecast in February was due to a deeper-than-expected annual decline in administered prices. A slightly stronger annual decline in prices in the adjusted inflation excluding fuels segment acted in the same direction. Prices in this category of goods and services have long been falling, reflecting the persisting sharp downturn in the domestic economy, including very slow wage growth in the business sector. By contrast, food prices rose rather faster year on year in February than expected by the CNB, but the deviation was smaller than in January. The effects of changes to indirect taxes and fuel prices were in line with the CNB’s expectations in February.
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. Inflation will pick up pace in the course of this year, returning towards the CNB’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. Inflation will reach 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