Inflation comes in above the forecast again in February 2021
The CNB comments on the February 2021 inflation figures
According to figures released today, the price level increased by 2.1% year on year in February 2021. It declined slightly compared to January and remains close to the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 2.1% year on year in February.
The February annual consumer price inflation figure was 0.4 percentage point higher than the CNB’s current forecast. As in January, this deviation was due largely to food prices, which have been highly volatile in recent months. Their year-on-year growth unexpectedly accelerated at the start of the year, partly offsetting its surprising marked slowdown at the end of last year. Core inflation was also slightly higher than forecasted in February, moderating rather more slowly than expected. A slightly stronger-than-forecasted slowdown in administered price inflation acted in the opposite direction. The moderation of the year-on-year fuel price decrease in February was broadly in line with the forecast. It reflected both the gradual unwinding of last year’s drop in prices at filling stations at the start of the first wave of the global pandemic and the increase in global oil prices in recent months. The first-round effects of changes to indirect taxes were also as forecasted.
The deviation of the released figures from the CNB’s current forecast moderated slightly in February. It should continue to be seen in the context of the extraordinary economic impacts of the peaking coronavirus pandemic. Consequently, huge uncertainty persists, affecting both economic life itself and the way it is captured by the statistical data. The CNB’s current forecast expects inflation to slow to levels close to the 2% target in the first quarter of this year. Inflation will fluctuate around the target for the rest of this year. The observed decline in inflation is due to a slowdown of the previously strong growth in food prices and administered prices. A decrease in core inflation in the first half of the year will reflect a continued weakening of growth in total costs. The disinflationary effect of the domestic economy will subsequently fade steadily as the Czech Republic gradually recovers from the pandemic. However, appreciation of the koruna will act in the opposite direction. Headline inflation will get slightly above the inflation target next year, owing mainly to an increase in excise duties. Monetary policy-relevant inflation, which looks past the first-round effects of changes to indirect taxes, will stabilise at the inflation target over the monetary policy horizon.
Petr Král, Executive Director, Monetary Department
Inflation comes in above the forecast again in February 2021
The CNB comments on the February 2021 inflation figures
According to figures released today, the price level increased by 2.1% year on year in February 2021. It declined slightly compared to January and remains close to the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 2.1% year on year in February.
The February annual consumer price inflation figure was 0.4 percentage point higher than the CNB’s current forecast. As in January, this deviation was due largely to food prices, which have been highly volatile in recent months. Their year-on-year growth unexpectedly accelerated at the start of the year, partly offsetting its surprising marked slowdown at the end of last year. Core inflation was also slightly higher than forecasted in February, moderating rather more slowly than expected. A slightly stronger-than-forecasted slowdown in administered price inflation acted in the opposite direction. The moderation of the year-on-year fuel price decrease in February was broadly in line with the forecast. It reflected both the gradual unwinding of last year’s drop in prices at filling stations at the start of the first wave of the global pandemic and the increase in global oil prices in recent months. The first-round effects of changes to indirect taxes were also as forecasted.
The deviation of the released figures from the CNB’s current forecast moderated slightly in February. It should continue to be seen in the context of the extraordinary economic impacts of the peaking coronavirus pandemic. Consequently, huge uncertainty persists, affecting both economic life itself and the way it is captured by the statistical data. The CNB’s current forecast expects inflation to slow to levels close to the 2% target in the first quarter of this year. Inflation will fluctuate around the target for the rest of this year. The observed decline in inflation is due to a slowdown of the previously strong growth in food prices and administered prices. A decrease in core inflation in the first half of the year will reflect a continued weakening of growth in total costs. The disinflationary effect of the domestic economy will subsequently fade steadily as the Czech Republic gradually recovers from the pandemic. However, appreciation of the koruna will act in the opposite direction. Headline inflation will get slightly above the inflation target next year, owing mainly to an increase in excise duties. Monetary policy-relevant inflation, which looks past the first-round effects of changes to indirect taxes, will stabilise at the inflation target over the monetary policy horizon.
Petr Král, Executive Director, Monetary Department