Inflation decreases further in line with the forecast in August 2023

The CNB comments on the August 2023 inflation figures

According to figures released today, the price level increased by 8.5% year on year in August 2023. Inflation thus slowed for the seventh consecutive month. However, it remained well above 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 (monetary policy-relevant inflation) rose by 8.3% year on year in August.

Inflation was in line with the CNB’s summer forecast in August. Individual components of inflation recorded slight deviations from the forecast. Food prices saw a lower year-on-year increase than predicted in the forecast. Core inflation was also below the forecast. By contrast, the year-on-year decline in fuel prices was less pronounced than expected. Administered prices rose somewhat faster. The effects of changes to indirect taxes were in line with the forecast.

August 2023 year-on-year in %
MPR Summer 2023 actual value
CPI 8.5 8.5
Administered prices 21.1 22.1
First-round impacts of changes to indirect taxes 0.2 0.2
Adjusted for changes to indirect taxes    
Prices of food, beverages, tobacco 8.0 7.5
Core inflation 6.2 6.0
Fuel prices -18.1 -13.1
Monetary policy-relevant inflation 8.3 8.3

Core inflation slowed further in August. It has been falling gradually since October 2022, reflecting a fading of growth in prices of foreign inputs and a cooling of domestic demand. The latter is acting against a further increase in the profit margins of producers, retailers and service providers. Growth in prices of both goods and services slowed. The decline in services price inflation is still being driven by a continued rapid decrease in the contribution of imputed rent. This reflects a slowdown in construction price inflation and stabilisation of new residential property prices due to higher interest rates.

Annual food price inflation slowed further in August. This was due to declining global agricultural commodity prices and domestic agricultural producer prices, as well as subdued domestic consumer demand. Annual administered price inflation remains strong but continued to slow in August. Despite a significant month-on-month increase, fuel prices continued to decline year on year in August as a result of last year’s high prices due to Russia’s invasion of Ukraine.

The observed price developments bear out the expectations of the summer forecast that inflation would continue to fall during summer. Annual inflation will slow until September. The downward trend in annual inflation will temporarily halt in October, but only as a result of the statistical effect of the energy savings tariff introduced at the end of last year. After its fade-out, inflation will fall sharply to close to the CNB’s 2% target early next year.

Petr Král, Executive Director, Monetary Department