The CNB comments on the December 2014 inflation figures
Inflation comes in significantly below the CNB forecast in December
According to figures released today, the price level increased by 0.1% year on year in December 2014. Consumer prices adjusted for the first-round effects of changes to indirect taxes fell slightly year on year in December. Inflation is thus well below the lower boundary of the tolerance band around the CNB’s target. The average inflation rate for 2014 as a whole was 0.4%, the lowest level since 2003 in line with the CNB’s expectations.
Annual headline inflation was 0.5 percentage point lower in December than forecasted by the CNB. As regards the market components of inflation, this deviation from the forecast was due to a year-on-year decrease in food prices, which the forecast had not expected to occur before the start of 2015, and a markedly deeper-than-expected decline in fuel prices, which fell considerably in December owing to a sharp drop in oil prices on world markets. As in October and November, the lower-than-expected inflation figure in December was also due to a smaller effect of changes to indirect taxes, as the CNB’s assumption that last autumn’s rise in excise duty on tobacco would affect cigarette prices already in the last months of 2014 did not materialise. By contrast, slightly higher-than-expected adjusted inflation excluding fuels affected the deviation from the CNB’s forecast in the opposite direction. Administered prices in December 2014 were in line with what the CNB had expected.
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 weakened exchange rate is still feeding through to inflation via import prices, partly offsetting deflationary price developments in the euro area and a sharp drop in world prices of oil. The domestic economy and the labour market have been pushing prices slightly upwards for the last few quarters. According to the current forecast, headline inflation will go up during 2015, owing mainly to rising economic activity and accelerating wage growth. By contrast, the inflationary effect of import prices will fade. Both headline and monetary-policy relevant inflation will reach the CNB’s 2% target in early 2016, i.e. at the monetary policy horizon. However, the risks to this forecast are tilted markedly in the anti-inflationary direction on account of price developments abroad and a drop in world prices of energy commodities.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the December 2014 inflation figures
Inflation comes in significantly below the CNB forecast in December
According to figures released today, the price level increased by 0.1% year on year in December 2014. Consumer prices adjusted for the first-round effects of changes to indirect taxes fell slightly year on year in December. Inflation is thus well below the lower boundary of the tolerance band around the CNB’s target. The average inflation rate for 2014 as a whole was 0.4%, the lowest level since 2003 in line with the CNB’s expectations.
Annual headline inflation was 0.5 percentage point lower in December than forecasted by the CNB. As regards the market components of inflation, this deviation from the forecast was due to a year-on-year decrease in food prices, which the forecast had not expected to occur before the start of 2015, and a markedly deeper-than-expected decline in fuel prices, which fell considerably in December owing to a sharp drop in oil prices on world markets. As in October and November, the lower-than-expected inflation figure in December was also due to a smaller effect of changes to indirect taxes, as the CNB’s assumption that last autumn’s rise in excise duty on tobacco would affect cigarette prices already in the last months of 2014 did not materialise. By contrast, slightly higher-than-expected adjusted inflation excluding fuels affected the deviation from the CNB’s forecast in the opposite direction. Administered prices in December 2014 were in line with what the CNB had expected.
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 weakened exchange rate is still feeding through to inflation via import prices, partly offsetting deflationary price developments in the euro area and a sharp drop in world prices of oil. The domestic economy and the labour market have been pushing prices slightly upwards for the last few quarters. According to the current forecast, headline inflation will go up during 2015, owing mainly to rising economic activity and accelerating wage growth. By contrast, the inflationary effect of import prices will fade. Both headline and monetary-policy relevant inflation will reach the CNB’s 2% target in early 2016, i.e. at the monetary policy horizon. However, the risks to this forecast are tilted markedly in the anti-inflationary direction on account of price developments abroad and a drop in world prices of energy commodities.
Tomáš Holub, Executive Director, Monetary and Statistics Department