The deviation of inflation from the CNB’s forecast decreases further in March 2021
The CNB comments on the March 2021 inflation figures
According to figures released today, the price level increased by 2.3% year on year in March 2021. It rose slightly compared to February and is in the upper half of the tolerance band around the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.2% year on year in March.
The March annual consumer price inflation figure was 0.3 percentage point higher than the CNB’s current forecast. The deviation was due largely to fuel prices. Their earlier-than-expected switch to year-on-year growth reflects the recent sharp rise in global oil prices, against the backdrop of a fading out of last year’s deep fall in prices at filling stations at the start of the first wave of the pandemic. Food prices, which have been highly volatile in recent months, decelerated in March and were only slightly above the forecast. Core inflation picked up slightly in March and was only marginally above the forecast. Administered prices continued to act in the opposite direction on the deviation. They recorded a year-on-year decline in March due to lower-than-forecasted growth in heat prices amid a continued decrease in electricity and gas prices for households. The first-round effects of changes to indirect taxes were broadly in line with the forecast.
The deviation of the released figures from the CNB’s current forecast moderated further in March. It should continue to be seen in the context of the extraordinary economic impacts of the peaking coronavirus pandemic. Consequently, huge uncertainty persists, affecting both economic life itself and the way it is captured by the statistical data. The CNB’s current forecast expects inflation to fluctuate around the target for the rest of this year after slowing close to the 2% target in the first quarter. The observed decline in inflation is due to a slowdown of the previously strong growth in food prices and administered prices. Core inflation reflects a continued weakening of growth in total costs in the first half of the year. The disinflationary effect of the domestic economy will subsequently fade steadily as the Czech Republic gradually recovers from the pandemic. However, appreciation of the koruna will act in the opposite direction. Headline inflation will get slightly above the inflation target next year, owing mainly to an increase in excise duties. Monetary policy-relevant inflation, which looks past the first-round effects of changes to indirect taxes, will stabilise at the inflation target over the monetary policy horizon.
Petr Král, Executive Director, Monetary Department
The deviation of inflation from the CNB’s forecast decreases further in March 2021
The CNB comments on the March 2021 inflation figures
According to figures released today, the price level increased by 2.3% year on year in March 2021. It rose slightly compared to February and is in the upper half of the tolerance band around the CNB’s 2% target. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 2.2% year on year in March.
The March annual consumer price inflation figure was 0.3 percentage point higher than the CNB’s current forecast. The deviation was due largely to fuel prices. Their earlier-than-expected switch to year-on-year growth reflects the recent sharp rise in global oil prices, against the backdrop of a fading out of last year’s deep fall in prices at filling stations at the start of the first wave of the pandemic. Food prices, which have been highly volatile in recent months, decelerated in March and were only slightly above the forecast. Core inflation picked up slightly in March and was only marginally above the forecast. Administered prices continued to act in the opposite direction on the deviation. They recorded a year-on-year decline in March due to lower-than-forecasted growth in heat prices amid a continued decrease in electricity and gas prices for households. The first-round effects of changes to indirect taxes were broadly in line with the forecast.
The deviation of the released figures from the CNB’s current forecast moderated further in March. It should continue to be seen in the context of the extraordinary economic impacts of the peaking coronavirus pandemic. Consequently, huge uncertainty persists, affecting both economic life itself and the way it is captured by the statistical data. The CNB’s current forecast expects inflation to fluctuate around the target for the rest of this year after slowing close to the 2% target in the first quarter. The observed decline in inflation is due to a slowdown of the previously strong growth in food prices and administered prices. Core inflation reflects a continued weakening of growth in total costs in the first half of the year. The disinflationary effect of the domestic economy will subsequently fade steadily as the Czech Republic gradually recovers from the pandemic. However, appreciation of the koruna will act in the opposite direction. Headline inflation will get slightly above the inflation target next year, owing mainly to an increase in excise duties. Monetary policy-relevant inflation, which looks past the first-round effects of changes to indirect taxes, will stabilise at the inflation target over the monetary policy horizon.
Petr Král, Executive Director, Monetary Department