Inflation comes in marginally above the forecast in June 2021

The CNB comments on the June 2021 inflation figures

According to figures released today, the price level increased by 2.8% year on year in June 2021. Inflation was thus slightly lower than in May and was in the upper half of the tolerance band around the CNB’s target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.6% year on year in June.

The June annual consumer price inflation figure was 0.1 percentage point higher than the CNB’s current forecast. Core inflation was higher than expected, driven by faster growth in prices of goods and services. Year-on-year growth in fuel prices, which was above the forecast due to the unexpectedly high price of oil, acted in the same direction. A further surprising slowdown in food price inflation, which remains volatile, had the opposite effect. The impact of changes to indirect taxes was slightly below the forecast. The very small year-on-year decline in administered prices was broadly in line with the forecast.  

The June inflation figures are in line with the overall message of the CNB’s current forecast. The forecast expects a temporary increase in annual consumer price inflation to the upper boundary of the tolerance band, owing mainly to a marked year-on-year rise in fuel prices. Inflation will later also be supported by buoyant growth in food prices, and by renewed growth in administered prices at the end of this year. Core inflation will fall only gradually from its current elevated levels. Its decline will be slowed by significant domestic demand pressures and brisk growth in industrial prices abroad. The overall inflation pressures will only start to ease in the autumn as the current elevated growth of import prices subsides. Conversely, domestic price pressures will rise slightly owing to the reopening of the domestic economy and a gradual pick-up in wage growth. Inflation will return close to the CNB’s 2% target next year, aided by the start of growth in monetary policy interest rates from June 2021 onwards.

Petr Král, Executive Director, Monetary Department