The CNB comments on the February 2017 inflation figures
According to figures released today, the price level increased by 2.5% year on year in February 2017. Inflation has thus been above the CNB’s target of 2%, but within the tolerance band, since the start of the year. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 2.5% year on year in February 2017.
Annual headline inflation was 0.4 percentage point higher in February than forecasted by the CNB. Similarly as in January, this was due primarily to higher-than-expected adjusted inflation excluding fuel prices. This indicator of core inflation has been reflecting the positive effect of continued growth in the domestic economy and accelerating wage growth for some time now. Core inflation has recently also been affected by renewed growth in euro area producer prices and by the price impacts of the introduction of electronic sales registration in accommodation and food services. To a lesser extent, the higher-than-forecasted February inflation was also driven by food prices, owing among other things to a jump in traditionally volatile prices of vegetables. A somewhat smaller-than-expected year-on-year increase in fuel prices and a slightly larger decline in administered prices affected the deviation from the CNB forecast in the opposite direction, albeit to a lesser extent. The impact of indirect tax changes was in line with the forecast.
The published figures represent a slight inflationary risk to the fulfilment of the CNB’s current forecast for the remainder of 2017. This forecast assumes that the exchange rate will be used as a monetary policy instrument until mid-2017. According to this forecast, inflation will increase further into the upper half of the tolerance band around the target this year. It will return to the 2% target from above at the monetary policy horizon, i.e. in the first half of 2018. Domestic production costs will continue to rise apace due mainly to rising wages. Coupled with renewed growth in industrial producer prices in the euro area, this will lead to a further increase in core inflation. Counteracting this will be a strengthening of the koruna expected by the forecast from mid-2017 onwards after the exit from the exchange rate commitment.
Tomáš Holub, Executive Director, Monetary Department
Inflation comes in above CNB forecast in February
The CNB comments on the February 2017 inflation figures
According to figures released today, the price level increased by 2.5% year on year in February 2017. Inflation has thus been above the CNB’s target of 2%, but within the tolerance band, since the start of the year. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 2.5% year on year in February 2017.
Annual headline inflation was 0.4 percentage point higher in February than forecasted by the CNB. Similarly as in January, this was due primarily to higher-than-expected adjusted inflation excluding fuel prices. This indicator of core inflation has been reflecting the positive effect of continued growth in the domestic economy and accelerating wage growth for some time now. Core inflation has recently also been affected by renewed growth in euro area producer prices and by the price impacts of the introduction of electronic sales registration in accommodation and food services. To a lesser extent, the higher-than-forecasted February inflation was also driven by food prices, owing among other things to a jump in traditionally volatile prices of vegetables. A somewhat smaller-than-expected year-on-year increase in fuel prices and a slightly larger decline in administered prices affected the deviation from the CNB forecast in the opposite direction, albeit to a lesser extent. The impact of indirect tax changes was in line with the forecast.
The published figures represent a slight inflationary risk to the fulfilment of the CNB’s current forecast for the remainder of 2017. This forecast assumes that the exchange rate will be used as a monetary policy instrument until mid-2017. According to this forecast, inflation will increase further into the upper half of the tolerance band around the target this year. It will return to the 2% target from above at the monetary policy horizon, i.e. in the first half of 2018. Domestic production costs will continue to rise apace due mainly to rising wages. Coupled with renewed growth in industrial producer prices in the euro area, this will lead to a further increase in core inflation. Counteracting this will be a strengthening of the koruna expected by the forecast from mid-2017 onwards after the exit from the exchange rate commitment.
Tomáš Holub, Executive Director, Monetary Department