Inflation slows in August 2022 for the first time in a long time
The CNB comments on the August 2022 inflation figures
According to figures released today, the price level increased by 17.2% year on year in August 2022. Annual inflation thus declined for the first time in thirteen months. 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 rose by 17.1% year on year in August.
The year-on-year increase in consumer prices in August was around two percentage points smaller than expected in the CNB’s summer forecast. This deviation was due to all components of inflation except changes to indirect taxes, with part of the deviation as a result of July price developments. Food prices and, to a lesser extent, core inflation, fuel prices and administered prices contributed most significantly to the deviation of August year-on-year inflation from the forecast.
August 2022
year-on-year in %
MPR Summer 2022
actual value
CPI
19.3
17.2
Administered prices
29.0
26.6
First-round impacts of changes to indirect taxes
0.1
0.1
Adjusted for changes to indirect taxes
Prices of food, beverages, tobacco
18.2
15.1
Core inflation
15.7
14.7
Fuel prices
47.3
32.9
Monetary policy-relevant inflation
19.2
17.1
Core inflation did not increase further compared to July but remains high. It reflects peaking domestic demand pressures and continued strong growth in costs due to escalating gas and electricity prices on international exchanges and persisting problems in global value chains. The effect of the post-Covid recovery in domestic demand is especially visible in goods prices, which accelerated further. Conversely, growth in services prices again slowed somewhat, with the expected effect of costlier summer holidays materialising only partly. The still exceptionally high contribution of the cost of owner-occupied housing in the form of imputed rent declined for the second time in a row in August. By contrast, a further slight pick-up in administered prices reflects continued growth in energy bills for households, which was slightly lower in August than forecasted. The increase in energy prices on exchanges to exceptional highs is also being driven by the high levels of uncertainty regarding gas supplies from Russia as a result of that country’s continued aggression in Ukraine. The war is also reflected in the continued rise in food prices due to soaring prices of agricultural commodities, fuelled by increasing energy costs and by the role of Ukraine in global wheat production. Growth in fuel prices eased surprisingly markedly in August, reflecting a significant correction in oil prices, followed by a drop in prices at filling stations (especially petrol) in the second half of the summer holidays.
The observed data confirm a peak in inflation, which the CNB forecast predicted in the second half of 2022. The evolution of inflation during the summer signals the possibility of inflation peaking at a somewhat lower level than expected. A moderation of price growth will be fostered in the subsequent period by an easing of the dynamics of production costs, a decline in households’ purchasing power, and the stabilising effect of the previous monetary policy tightening helping to cool domestic demand. According to the forecast, the downward trend in inflation will become stronger in the course of next year due to the above-mentioned factors. Inflation will return close to the CNB’s 2% target over the monetary policy horizon, i.e. in the first half of 2024 for the summer forecast.
Petr Král, Executive Director, Monetary Department
Inflation slows in August 2022 for the first time in a long time
The CNB comments on the August 2022 inflation figures
According to figures released today, the price level increased by 17.2% year on year in August 2022. Annual inflation thus declined for the first time in thirteen months. 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 rose by 17.1% year on year in August.
The year-on-year increase in consumer prices in August was around two percentage points smaller than expected in the CNB’s summer forecast. This deviation was due to all components of inflation except changes to indirect taxes, with part of the deviation as a result of July price developments. Food prices and, to a lesser extent, core inflation, fuel prices and administered prices contributed most significantly to the deviation of August year-on-year inflation from the forecast.
Core inflation did not increase further compared to July but remains high. It reflects peaking domestic demand pressures and continued strong growth in costs due to escalating gas and electricity prices on international exchanges and persisting problems in global value chains. The effect of the post-Covid recovery in domestic demand is especially visible in goods prices, which accelerated further. Conversely, growth in services prices again slowed somewhat, with the expected effect of costlier summer holidays materialising only partly. The still exceptionally high contribution of the cost of owner-occupied housing in the form of imputed rent declined for the second time in a row in August. By contrast, a further slight pick-up in administered prices reflects continued growth in energy bills for households, which was slightly lower in August than forecasted. The increase in energy prices on exchanges to exceptional highs is also being driven by the high levels of uncertainty regarding gas supplies from Russia as a result of that country’s continued aggression in Ukraine. The war is also reflected in the continued rise in food prices due to soaring prices of agricultural commodities, fuelled by increasing energy costs and by the role of Ukraine in global wheat production. Growth in fuel prices eased surprisingly markedly in August, reflecting a significant correction in oil prices, followed by a drop in prices at filling stations (especially petrol) in the second half of the summer holidays.
The observed data confirm a peak in inflation, which the CNB forecast predicted in the second half of 2022. The evolution of inflation during the summer signals the possibility of inflation peaking at a somewhat lower level than expected. A moderation of price growth will be fostered in the subsequent period by an easing of the dynamics of production costs, a decline in households’ purchasing power, and the stabilising effect of the previous monetary policy tightening helping to cool domestic demand. According to the forecast, the downward trend in inflation will become stronger in the course of next year due to the above-mentioned factors. Inflation will return close to the CNB’s 2% target over the monetary policy horizon, i.e. in the first half of 2024 for the summer forecast.
Petr Král, Executive Director, Monetary Department