Inflation comes in slightly above the forecast but is back in the tolerance band around the target in May 2020
The CNB comments on the May 2020 inflation figures
According to figures released today, the price level increased by 2.9% year on year in May 2020. Inflation decreased compared with April and returned to the tolerance band around the CNB's 2% target after half a year. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 3% year on year in May.
The May annual consumer price inflation figure was 0.3 percentage point higher than the CNB's current forecast. The positive deviation of inflation from the forecast was due to higher-than-expected core inflation. By contrast, the drop in fuel prices, reflecting the collapse of global oil prices, was stronger than in the forecast. The effects of changes to indirect taxes were slightly lower than expected due to a somewhat slower pass-through of increased excise duty on tobacco into cigarette prices. Growth in administered prices slowed broadly in line with the forecast. The forecast for continued rapid growth in food prices, still reflecting high demand for food, labour shortages in agriculture in Europe and transport restrictions due to the coronavirus pandemic, also materialised.
The observed slowdown in inflation and the return of inflation to the tolerance band is - bearing in mind the persisting great uncertainty regarding the economic impacts of the coronavirus pandemic - qualitatively broadly in line with the CNB's current forecast. The decrease in inflation reflects mainly the generally anti-inflationary overall impacts of the coronavirus crisis amid a deep decline in domestic economic activity. Inflation will decline towards the 2% target at the end of this year, as appreciably weaker domestic inflation pressures will outweigh the temporary inflationary effect of a weaker koruna. 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 slightly above the forecast but is back in the tolerance band around the target in May 2020
The CNB comments on the May 2020 inflation figures
According to figures released today, the price level increased by 2.9% year on year in May 2020. Inflation decreased compared with April and returned to the tolerance band around the CNB's 2% target after half a year. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 3% year on year in May.
The May annual consumer price inflation figure was 0.3 percentage point higher than the CNB's current forecast. The positive deviation of inflation from the forecast was due to higher-than-expected core inflation. By contrast, the drop in fuel prices, reflecting the collapse of global oil prices, was stronger than in the forecast. The effects of changes to indirect taxes were slightly lower than expected due to a somewhat slower pass-through of increased excise duty on tobacco into cigarette prices. Growth in administered prices slowed broadly in line with the forecast. The forecast for continued rapid growth in food prices, still reflecting high demand for food, labour shortages in agriculture in Europe and transport restrictions due to the coronavirus pandemic, also materialised.
The observed slowdown in inflation and the return of inflation to the tolerance band is - bearing in mind the persisting great uncertainty regarding the economic impacts of the coronavirus pandemic - qualitatively broadly in line with the CNB's current forecast. The decrease in inflation reflects mainly the generally anti-inflationary overall impacts of the coronavirus crisis amid a deep decline in domestic economic activity. Inflation will decline towards the 2% target at the end of this year, as appreciably weaker domestic inflation pressures will outweigh the temporary inflationary effect of a weaker koruna. 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