Inflation comes in slightly below the forecast and returns to the tolerance band around the CNB target in October 2020
The CNB comments on the October 2020 inflation figures
According to figures released today, the price level increased by 2.9% year on year in October 2020. Inflation was lower than in September, declining into the upper half of the tolerance band around the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 2.9% year on year in October.
The October annual consumer price inflation figure was just 0.1 percentage point lower than the CNB’s current forecast. All the components of inflation were also very much in line with expectations. Food price inflation slowed further, in line with the forecast. The expectations of a decline in administered price inflation were also fulfilled to a large extent. Core inflation, which did not rise any further in October, was only slightly below the forecast. The year-on-year decline in fuel prices was only a little lower than forecasted. The estimate of the first-round effects of changes to indirect taxes materialised.
The drop in inflation in October is in line with CNB’s current forecast. According to the forecast, inflation will decrease into the upper half of the tolerance band around the target in 2020 Q4. This will be due to the anti-inflationary demand effects of the second wave of the coronavirus pandemic amid subdued external and above all domestic economic activity. However, cost pressures will remain elevated for some time. A cooling labour market and slower wage growth will dampen growth in domestic costs, but this will be offset by the recent significant depreciation of the koruna. Inflation will keep falling next year, initially due to the fade-out of the high growth in market prices seen in early 2020 and subsequently also to a moderation of total cost growth, which will also reflect renewed appreciation of the koruna. Core inflation and food price inflation will both slow. Lower growth in electricity prices and a decline in gas prices will be reflected in a decrease in administered price inflation. By contrast, the fall in fuel prices will dissipate. Inflation will be close to the 2% target over the monetary policy horizon, i.e. in late 2021 and early 2022.
Petr Král, Executive Director, Monetary Department
Inflation comes in slightly below the forecast and returns to the tolerance band around the CNB target in October 2020
The CNB comments on the October 2020 inflation figures
According to figures released today, the price level increased by 2.9% year on year in October 2020. Inflation was lower than in September, declining into the upper half of the tolerance band around the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes also rose by 2.9% year on year in October.
The October annual consumer price inflation figure was just 0.1 percentage point lower than the CNB’s current forecast. All the components of inflation were also very much in line with expectations. Food price inflation slowed further, in line with the forecast. The expectations of a decline in administered price inflation were also fulfilled to a large extent. Core inflation, which did not rise any further in October, was only slightly below the forecast. The year-on-year decline in fuel prices was only a little lower than forecasted. The estimate of the first-round effects of changes to indirect taxes materialised.
The drop in inflation in October is in line with CNB’s current forecast. According to the forecast, inflation will decrease into the upper half of the tolerance band around the target in 2020 Q4. This will be due to the anti-inflationary demand effects of the second wave of the coronavirus pandemic amid subdued external and above all domestic economic activity. However, cost pressures will remain elevated for some time. A cooling labour market and slower wage growth will dampen growth in domestic costs, but this will be offset by the recent significant depreciation of the koruna. Inflation will keep falling next year, initially due to the fade-out of the high growth in market prices seen in early 2020 and subsequently also to a moderation of total cost growth, which will also reflect renewed appreciation of the koruna. Core inflation and food price inflation will both slow. Lower growth in electricity prices and a decline in gas prices will be reflected in a decrease in administered price inflation. By contrast, the fall in fuel prices will dissipate. Inflation will be close to the 2% target over the monetary policy horizon, i.e. in late 2021 and early 2022.
Petr Král, Executive Director, Monetary Department