Inflation is in line with the forecast and remains above the upper boundary of the CNB’s tolerance band in July 2020
The CNB comments on the July 2020 inflation figures
According to figures released today, the price level increased by 3.4% year on year in July 2020. Inflation was thus slightly higher than in June, 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 also rose by 3.4% year on year in July.
The July annual headline consumer price inflation figure was in line with the CNB’s current forecast. Core inflation increased faster than forecasted, reflecting the fading of previously strong domestic demand and temporarily elevated growth in corporate costs. This deviation was offset in the opposite direction by lower-than-forecasted food price inflation and overall slightly lower first-round effects of changes to indirect taxes. Growth in administered prices was in line with the forecast, as was the year-on-year decline in fuel prices.
The observed acceleration of inflation is in line with CNB’s current forecast. According to the forecast, inflation will remain above 3% until the end of this year, as firms’ efforts to make up the loss of revenue they suffered during the coronavirus pandemic and growth in their costs will foster continued price growth despite a deep decline in demand and overall economic activity. Inflation will fall markedly at the start of next year in connection with lower growth in domestic costs, a slightly appreciating koruna and a cooling of the labour market. As regards the structure of inflation, this will be driven by core inflation and above all food prices. Administered price inflation will also decrease due to slower growth in electricity prices. By contrast, the fall in fuel prices stemming from the previous collapse of global oil prices will dissipate. Inflation will decrease towards the CNB’s 2% target over the monetary policy horizon and stay close to it in 2022.
Luboš Komárek, Deputy Executive Director, Monetary Department
Inflation is in line with the forecast and remains above the upper boundary of the CNB’s tolerance band in July 2020
The CNB comments on the July 2020 inflation figures
According to figures released today, the price level increased by 3.4% year on year in July 2020. Inflation was thus slightly higher than in June, 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 also rose by 3.4% year on year in July.
The July annual headline consumer price inflation figure was in line with the CNB’s current forecast. Core inflation increased faster than forecasted, reflecting the fading of previously strong domestic demand and temporarily elevated growth in corporate costs. This deviation was offset in the opposite direction by lower-than-forecasted food price inflation and overall slightly lower first-round effects of changes to indirect taxes. Growth in administered prices was in line with the forecast, as was the year-on-year decline in fuel prices.
The observed acceleration of inflation is in line with CNB’s current forecast. According to the forecast, inflation will remain above 3% until the end of this year, as firms’ efforts to make up the loss of revenue they suffered during the coronavirus pandemic and growth in their costs will foster continued price growth despite a deep decline in demand and overall economic activity. Inflation will fall markedly at the start of next year in connection with lower growth in domestic costs, a slightly appreciating koruna and a cooling of the labour market. As regards the structure of inflation, this will be driven by core inflation and above all food prices. Administered price inflation will also decrease due to slower growth in electricity prices. By contrast, the fall in fuel prices stemming from the previous collapse of global oil prices will dissipate. Inflation will decrease towards the CNB’s 2% target over the monetary policy horizon and stay close to it in 2022.
Luboš Komárek, Deputy Executive Director, Monetary Department