Inflation increases to the upper half of the tolerance band around the CNB’s 2% target in April 2024

The CNB comments on the April 2024 inflation figures

According to figures released today, the price level increased by 2.9% year on year in April 2024. Annual inflation rose by 0.9 percentage point compared to the previous month. Consumer price inflation is thus in the upper half of the tolerance band around the CNB’s 2% target.

Annual inflation was 0.4 percentage point higher in April than the CNB’s spring forecast. This deviation was predominantly due to food prices. The forecast had expected a continuing – albeit moderating – year-on-year decline in food prices in April, whereas in reality they went up slightly. This is one of the most volatile items of the consumer basket. At the same time, we can expect the further evolution of food prices to continue to benefit from declining global agricultural commodity prices and domestic agricultural producer prices. Prices of all the remaining items of the consumer basket evolved roughly in line with the forecast.

April 2024 year-on-year in %
MPR Spring 2024 actual value
CPI 2.5 2.9
Administered prices 6.0 6.3
First-round impacts of changes to indirect taxes 0.1 0.1
Adjusted for changes to indirect taxes    
Prices of food, beverages, tobacco -0.5 1.0
Core inflation 2.6 2.6
Fuel prices 7.8 7.4
Monetary policy-relevant inflation 2.3 2.8

In line with expectations, core inflation slowed slightly further in April. It has been fading for the second consecutive year, reflecting low growth in prices of foreign inputs, but also the previous long-running downturn in domestic demand due, among other factors, to tight CNB monetary policy. This is also fostering a decrease in the profit mark-ups of producers, retailers and service providers over their costs. In this context, growth in goods and services prices slowed slightly in April. However, services price inflation remains rather elevated. The growth in imputed rent edged up but remains low due to an only gradual recovery on the property market.

As expected, the increase in fuel prices picked up pace in April, driven by the previous growth in oil prices on global markets and the weakening of the koruna in previous months. However, both factors are already fading rapidly. In line with expectations, year-on-year growth in administered prices slowed somewhat in April owing to a decrease in housing-related energy prices. After the closing date of the forecast, a major supplier announced a decrease in electricity and gas prices planned for late Q2 and early Q3 this year. Its impact will be slightly anti-inflationary given the central bank’s current outlook for this consumer basket segment.

In month-on-month terms, the price level increased by 0.7% in April. Although the increase was slightly higher than expected in the spring forecast, the deviation was due mainly to food prices, which often record large fluctuations. The qualitative message of the CNB’s spring forecast thus remains valid. According to the forecast, inflation will be close to the 2% target throughout this year.

Petr Král, Executive Director, Monetary Department