Inflation comes in slightly above the forecast and just above the upper boundary of the CNB’s tolerance band in November 2019
The CNB comments on the November 2019 inflation figures
According to figures released today, the price level increased by 3.1% year on year in November 2019. Inflation was thus higher than in October, moving just 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 rose by 3.2% year on year in November 2019.
The November annual consumer price inflation figure was 0.2 percentage point higher than the CNB forecast. This was due predominantly to unexpectedly rapid growth in food prices, which, among other things, still reflects the effects of last year’s bad harvest of some food commodities due to the hot and dry summer. As in October, core inflation was also slightly higher than forecasted in November. A somewhat slighter-than-expected year-on-year decline in fuel prices acted in the same direction. By contrast, year-on-year growth in administered prices was slightly below the forecast in November. The first-round effects of changes to indirect taxes were in line with the forecast.
The published data are qualitatively in line with the CNB’s current forecast, which had predicted a temporary rise in inflation in late 2019 and early 2020. The currently elevated price growth reflects inflation pressures associated with the long-running – albeit recently slowing – growth of the domestic economy. It is manifesting itself in persisting labour market tightness, record-low unemployment, still very brisk wage growth and increasing consumption of Czech households. Inflation is also being amplified this year by exceptionally fast growth in administered prices (due to increases in prices of electricity, gas and heating), which is a response to the previous increase in global energy commodity prices. The high inflation is also being fostered by the rapid growth in food prices.
According to the CNB’s forecast, growth in domestic costs has nonetheless started to slow and will thus gradually moderate further in the quarters ahead due to slowing wage growth and renewed rising growth in labour efficiency. The anti-inflationary effect of import prices, reflecting subdued inflation abroad and expected appreciation of the koruna, will act in the same direction on Czech inflation in the period ahead. Conversely, the decrease in inflation will be slowed throughout 2020 by the impacts of changes to indirect taxes. The current rapid growth in administered and food prices will gradually moderate over the coming months. Inflation will thus gradually decrease during 2020 and approach the CNB’s 2% target over the monetary policy horizon. This will be aided by the still firm anchoring of inflation expectations close to the 2% target.
Petr Král, Executive Director, Monetary Department
Inflation comes in slightly above the forecast and just above the upper boundary of the CNB’s tolerance band in November 2019
The CNB comments on the November 2019 inflation figures
According to figures released today, the price level increased by 3.1% year on year in November 2019. Inflation was thus higher than in October, moving just 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 rose by 3.2% year on year in November 2019.
The November annual consumer price inflation figure was 0.2 percentage point higher than the CNB forecast. This was due predominantly to unexpectedly rapid growth in food prices, which, among other things, still reflects the effects of last year’s bad harvest of some food commodities due to the hot and dry summer. As in October, core inflation was also slightly higher than forecasted in November. A somewhat slighter-than-expected year-on-year decline in fuel prices acted in the same direction. By contrast, year-on-year growth in administered prices was slightly below the forecast in November. The first-round effects of changes to indirect taxes were in line with the forecast.
The published data are qualitatively in line with the CNB’s current forecast, which had predicted a temporary rise in inflation in late 2019 and early 2020. The currently elevated price growth reflects inflation pressures associated with the long-running – albeit recently slowing – growth of the domestic economy. It is manifesting itself in persisting labour market tightness, record-low unemployment, still very brisk wage growth and increasing consumption of Czech households. Inflation is also being amplified this year by exceptionally fast growth in administered prices (due to increases in prices of electricity, gas and heating), which is a response to the previous increase in global energy commodity prices. The high inflation is also being fostered by the rapid growth in food prices.
According to the CNB’s forecast, growth in domestic costs has nonetheless started to slow and will thus gradually moderate further in the quarters ahead due to slowing wage growth and renewed rising growth in labour efficiency. The anti-inflationary effect of import prices, reflecting subdued inflation abroad and expected appreciation of the koruna, will act in the same direction on Czech inflation in the period ahead. Conversely, the decrease in inflation will be slowed throughout 2020 by the impacts of changes to indirect taxes. The current rapid growth in administered and food prices will gradually moderate over the coming months. Inflation will thus gradually decrease during 2020 and approach the CNB’s 2% target over the monetary policy horizon. This will be aided by the still firm anchoring of inflation expectations close to the 2% target.
Petr Král, Executive Director, Monetary Department