Inflation comes in slightly above the CNB forecast; a return to the 2% target can be expected in the second half of next year
The CNB comments on the April 2022 inflation figures
According to figures released today, the price level increased by 14.2% year on year in April 2022. Inflation thus increased further, significantly exceeding the upper boundary of the tolerance band around the CNB’s target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 13.9% year on year in April.
The annual increase in consumer prices in April was 0.4 percentage point higher than expected in the CNB’s spring forecast. This deviation was due to a higher-than-expected acceleration in core inflation and administered prices. By contrast, food prices rose by slightly less than forecasted. The forecast for fuel prices broadly materialised.
April 2022
year-on-year in %
MPR Spring 2022
actual value
CPI
13.8
14.2
Administered prices
20.9
22.0
First-round impacts of changes to indirect taxes
0.3
0.3
Adjusted for changes to indirect taxes
Prices of food, beverages, tobacco
9.3
8.5
Core inflation
12.1
12.8
Fuel prices
42.3
41.9
Monetary policy-relevant inflation
13.5
13.9
Core inflation reflects still strong producer price inflation abroad and lingering substantial domestic cost and demand pressures. Within core inflation, the contribution of the cost of owner-occupied housing in the form of imputed rent has increased further. The continued marked increase in administered price inflation reflects persistently rising electricity, gas and heating bills for households. The increase in energy prices on exchanges to record highs was also fostered by Russia’s invasion of Ukraine. The war is also reflected in increasing food prices due to soaring agricultural commodity prices, as Ukraine is one of the world’s leading wheat exporters. The marked increase in oil prices as a result of the outbreak of the war is also causing exceptionally high year-on-year growth in fuel prices.
According to the baseline scenario of the CNB’s spring forecast, inflation will peak at around 15% in the next few months, with all its components contributing to the increase, and remain in double digits for the rest of this year. This will reflect continued growth in gas and electricity prices for households, a further acceleration in food price inflation and persisting high core inflation. The record-high cost pressures driven by import prices and the domestic economy have probably peaked already. In the course of the year, inflation pressures will decrease owing to a fading of the currently strong growth in import prices, a decline in domestic profit margins and a curbing of wage growth. Next year, cost pressures will moderate further as import prices stabilise and then fall slightly. Inflation will drop below 10% in early 2023 due to an unwinding of the current exceptional price pressures, the CNB’s interest rate increases to date and an expected exchange rate appreciation close to CZK 24 to the euro. At the same time, the CNB’s forceful monetary policy is helping to anchor the inflation expectations of firms and households. As a result, inflation will decrease swiftly next year and fall close to the 2% target in the second half of 2023.
Petr Král, Executive Director, Monetary Department
Inflation comes in slightly above the CNB forecast; a return to the 2% target can be expected in the second half of next year
The CNB comments on the April 2022 inflation figures
According to figures released today, the price level increased by 14.2% year on year in April 2022. Inflation thus increased further, significantly exceeding the upper boundary of the tolerance band around the CNB’s target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 13.9% year on year in April.
The annual increase in consumer prices in April was 0.4 percentage point higher than expected in the CNB’s spring forecast. This deviation was due to a higher-than-expected acceleration in core inflation and administered prices. By contrast, food prices rose by slightly less than forecasted. The forecast for fuel prices broadly materialised.
Core inflation reflects still strong producer price inflation abroad and lingering substantial domestic cost and demand pressures. Within core inflation, the contribution of the cost of owner-occupied housing in the form of imputed rent has increased further. The continued marked increase in administered price inflation reflects persistently rising electricity, gas and heating bills for households. The increase in energy prices on exchanges to record highs was also fostered by Russia’s invasion of Ukraine. The war is also reflected in increasing food prices due to soaring agricultural commodity prices, as Ukraine is one of the world’s leading wheat exporters. The marked increase in oil prices as a result of the outbreak of the war is also causing exceptionally high year-on-year growth in fuel prices.
According to the baseline scenario of the CNB’s spring forecast, inflation will peak at around 15% in the next few months, with all its components contributing to the increase, and remain in double digits for the rest of this year. This will reflect continued growth in gas and electricity prices for households, a further acceleration in food price inflation and persisting high core inflation. The record-high cost pressures driven by import prices and the domestic economy have probably peaked already. In the course of the year, inflation pressures will decrease owing to a fading of the currently strong growth in import prices, a decline in domestic profit margins and a curbing of wage growth. Next year, cost pressures will moderate further as import prices stabilise and then fall slightly. Inflation will drop below 10% in early 2023 due to an unwinding of the current exceptional price pressures, the CNB’s interest rate increases to date and an expected exchange rate appreciation close to CZK 24 to the euro. At the same time, the CNB’s forceful monetary policy is helping to anchor the inflation expectations of firms and households. As a result, inflation will decrease swiftly next year and fall close to the 2% target in the second half of 2023.
Petr Král, Executive Director, Monetary Department