Inflation comes in slightly above the forecast and remains above the upper boundary of the CNB’s tolerance band in February 2020
The CNB comments on the February 2020 inflation figures
According to figures released today, the price level increased by 3.7% year on year in February 2020. Inflation thus increased slightly compared with January, remaining 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 3.6% year on year in February.
The February annual consumer price inflation figure was 0.2 percentage point higher than the CNB’s latest forecast. This deviation was due predominantly to core inflation, which continued to rise. Food prices somewhat corrected their January increase but were still above the forecast in year-on-year terms in February. By contrast, administered prices and fuel prices increased slightly more slowly than forecasted in February. The first-round effects of changes to indirect taxes were also lower than forecasted, as the expected rise in cigarette prices due to the January increase in excise duties on tobacco has not materialised so far.
The published data are qualitatively in line with the CNB’s current forecast. The forecast expects inflation to move appreciably above the upper boundary of the tolerance band around the target in the first few months of this year. This is due mainly to the price impacts of changes to indirect taxes in an environment of persisting domestic inflation pressures. However, these fundamental pressures will gradually weaken according to the current forecast, mainly due to slowing wage growth amid slower growth of the Czech economy. A temporary decline in import prices and falling growth in administered prices and subsequently food prices will also have an anti-inflationary effect. However, the decrease in inflation will be slowed by the assumed price impacts of changes to indirect taxes. Inflation will thus stay above the upper boundary of the tolerance band for most of this year and will fall close to the 2% target at the start of next year. The return of inflation to the target will be supported by the tightening of both the interest rate and exchange rate components of the monetary conditions at the start of this year and the still firmly anchored inflation expectations.
Petr Král, Executive Director, Monetary Department
Inflation comes in slightly above the forecast and remains above the upper boundary of the CNB’s tolerance band in February 2020
The CNB comments on the February 2020 inflation figures
According to figures released today, the price level increased by 3.7% year on year in February 2020. Inflation thus increased slightly compared with January, remaining 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 3.6% year on year in February.
The February annual consumer price inflation figure was 0.2 percentage point higher than the CNB’s latest forecast. This deviation was due predominantly to core inflation, which continued to rise. Food prices somewhat corrected their January increase but were still above the forecast in year-on-year terms in February. By contrast, administered prices and fuel prices increased slightly more slowly than forecasted in February. The first-round effects of changes to indirect taxes were also lower than forecasted, as the expected rise in cigarette prices due to the January increase in excise duties on tobacco has not materialised so far.
The published data are qualitatively in line with the CNB’s current forecast. The forecast expects inflation to move appreciably above the upper boundary of the tolerance band around the target in the first few months of this year. This is due mainly to the price impacts of changes to indirect taxes in an environment of persisting domestic inflation pressures. However, these fundamental pressures will gradually weaken according to the current forecast, mainly due to slowing wage growth amid slower growth of the Czech economy. A temporary decline in import prices and falling growth in administered prices and subsequently food prices will also have an anti-inflationary effect. However, the decrease in inflation will be slowed by the assumed price impacts of changes to indirect taxes. Inflation will thus stay above the upper boundary of the tolerance band for most of this year and will fall close to the 2% target at the start of next year. The return of inflation to the target will be supported by the tightening of both the interest rate and exchange rate components of the monetary conditions at the start of this year and the still firmly anchored inflation expectations.
Petr Král, Executive Director, Monetary Department