Inflation remains slightly below the CNB forecast in May
The CNB comments on the May 2017 inflation figures
According to figures released today, the price level increased by 2.4% year on year in May 2017. In line with the CNB’s expectations, inflation is thus in the upper half of the tolerance band around the 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.5% year on year in May.
Annual headline inflation was 0.2 percentage point lower in May than forecasted by the CNB. As in April, this was mainly because of lower food prices. A smaller-than-forecasted annual increase in fuel prices acted in the same direction. By contrast, the downward deviation of inflation from the forecast continued to be reduced by slightly higher-than-expected core inflation. The latter has been reflecting continued domestic economic growth and increased wage growth for some time now. Core inflation has also recently been affected by faster growth in euro area producer prices. The other inflation components, i.e. administered prices and the first-round effects of changes to indirect taxes, were broadly in line with the forecast in May.
The published figures represent only a slight anti-inflationary risk to the CNB’s current forecast. According to the forecast, inflation will remain in the upper half of the tolerance band for the rest of this year. Inflation will then return to the target at the start of next year and remain very close to it at the monetary policy horizon, i.e in 2018 Q2 and 2018 Q3. The expected inflation moderation is due to a slight slowdown in growth of domestic costs in the period ahead. This will be due to rising labour productivity growth, despite slightly accelerating growth in wages and economic activity. At the same time, the current inflationary effect of import prices will quickly turn anti-inflationary again due to slower growth in foreign producer prices, coupled with the forecasted appreciation of the koruna.
Petr Král, Deputy Executive Director, Monetary Department
Inflation remains slightly below the CNB forecast in May
The CNB comments on the May 2017 inflation figures
According to figures released today, the price level increased by 2.4% year on year in May 2017. In line with the CNB’s expectations, inflation is thus in the upper half of the tolerance band around the 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.5% year on year in May.
Annual headline inflation was 0.2 percentage point lower in May than forecasted by the CNB. As in April, this was mainly because of lower food prices. A smaller-than-forecasted annual increase in fuel prices acted in the same direction. By contrast, the downward deviation of inflation from the forecast continued to be reduced by slightly higher-than-expected core inflation. The latter has been reflecting continued domestic economic growth and increased wage growth for some time now. Core inflation has also recently been affected by faster growth in euro area producer prices. The other inflation components, i.e. administered prices and the first-round effects of changes to indirect taxes, were broadly in line with the forecast in May.
The published figures represent only a slight anti-inflationary risk to the CNB’s current forecast. According to the forecast, inflation will remain in the upper half of the tolerance band for the rest of this year. Inflation will then return to the target at the start of next year and remain very close to it at the monetary policy horizon, i.e in 2018 Q2 and 2018 Q3. The expected inflation moderation is due to a slight slowdown in growth of domestic costs in the period ahead. This will be due to rising labour productivity growth, despite slightly accelerating growth in wages and economic activity. At the same time, the current inflationary effect of import prices will quickly turn anti-inflationary again due to slower growth in foreign producer prices, coupled with the forecasted appreciation of the koruna.
Petr Král, Deputy Executive Director, Monetary Department