Inflation comes in above the forecast and slightly above the upper boundary of the CNB's tolerance band in June 2020
The CNB comments on the June 2020 inflation figures
According to figures released today, the price level increased by 3.3% year on year in June 2020. Inflation was thus higher than in May and again increased slightly above the upper boundary of the tolerance band around the CNB's 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 3.3% year on year in June.
The June annual consumer price inflation figure was 0.4 percentage point higher than the CNB's current forecast. The positive deviation of inflation from the forecast was due mainly to significantly higher-than-expected core inflation. It probably reflects the previously solid income situation of households together with temporarily increased costs of firms amid the coronavirus crisis, including the effect of a weaker koruna. Growth in administered prices was also slightly faster than forecasted. A rather stronger-than-forecasted year-on-year drop in fuel prices, reflecting the previous collapse of global oil prices, acted in the opposite direction. In addition, growth in food prices accelerated less than forecasted but remained high in June. It continues to reflect stronger demand for food amid higher costs and labour shortages in agriculture in Europe due to the coronavirus crisis. The effects of changes to indirect taxes were also more moderate than forecasted, due to a somewhat slower pass-through of increased excise duty on tobacco to cigarette prices.
The published figures represent an inflationary risk to the CNB's current forecast overall, especially for the next few months. This is mostly due to the increasing deviation of core inflation from the forecast in a context of persisting great uncertainty regarding the economic impacts of the coronavirus pandemic. According to the current forecast, appreciably weaker domestic price pressures will gradually outweigh the temporary inflationary effect of a weaker koruna. The generally anti-inflationary impacts of the coronavirus crisis amid a deep decline of the domestic economy will lead to a decrease in inflation towards the 2% target at the end of this year. The decline in inflation will also be fostered by an already observed significant drop in fuel prices and by slower growth in administered prices. By contrast, food price inflation will remain high this year, owing to the inflationary effects of factors on both the demand and supply side. The decline in inflation will also be slowed this year and the next by the price impacts of changes to indirect taxes. As a result, inflation will be close to the CNB's 2% target in 2021.
Petr Král, Executive Director, Monetary Department
Inflation comes in above the forecast and slightly above the upper boundary of the CNB's tolerance band in June 2020
The CNB comments on the June 2020 inflation figures
According to figures released today, the price level increased by 3.3% year on year in June 2020. Inflation was thus higher than in May and again increased slightly above the upper boundary of the tolerance band around the CNB's 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 3.3% year on year in June.
The June annual consumer price inflation figure was 0.4 percentage point higher than the CNB's current forecast. The positive deviation of inflation from the forecast was due mainly to significantly higher-than-expected core inflation. It probably reflects the previously solid income situation of households together with temporarily increased costs of firms amid the coronavirus crisis, including the effect of a weaker koruna. Growth in administered prices was also slightly faster than forecasted. A rather stronger-than-forecasted year-on-year drop in fuel prices, reflecting the previous collapse of global oil prices, acted in the opposite direction. In addition, growth in food prices accelerated less than forecasted but remained high in June. It continues to reflect stronger demand for food amid higher costs and labour shortages in agriculture in Europe due to the coronavirus crisis. The effects of changes to indirect taxes were also more moderate than forecasted, due to a somewhat slower pass-through of increased excise duty on tobacco to cigarette prices.
The published figures represent an inflationary risk to the CNB's current forecast overall, especially for the next few months. This is mostly due to the increasing deviation of core inflation from the forecast in a context of persisting great uncertainty regarding the economic impacts of the coronavirus pandemic. According to the current forecast, appreciably weaker domestic price pressures will gradually outweigh the temporary inflationary effect of a weaker koruna. The generally anti-inflationary impacts of the coronavirus crisis amid a deep decline of the domestic economy will lead to a decrease in inflation towards the 2% target at the end of this year. The decline in inflation will also be fostered by an already observed significant drop in fuel prices and by slower growth in administered prices. By contrast, food price inflation will remain high this year, owing to the inflationary effects of factors on both the demand and supply side. The decline in inflation will also be slowed this year and the next by the price impacts of changes to indirect taxes. As a result, inflation will be close to the CNB's 2% target in 2021.
Petr Král, Executive Director, Monetary Department