The CNB comments on the October 2015 inflation figures
Inflation comes in slightly below the CNB forecast in October
According to figures released today, the price level increased by 0.2% year on year in October 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 0.1% year on year in October. Inflation is thus still well below the CNB’s target, or below the lower boundary of the tolerance band around the target.
Annual headline inflation was 0.2 percentage point lower in October than forecasted by the CNB. This deviation was due predominantly to food prices, whose annual growth in October was lower than expected by the CNB. A somewhat deeper-than-forecasted annual decline in administered prices and fuel prices acted in the same direction, albeit to a lesser extent. Slightly faster adjusted inflation excluding fuels, which have started to rise again slowly in recent months, affected the deviation in the opposite direction. This indicator of core inflation is being affected by growth of the domestic economy and wages and by depreciation of the koruna against the dollar. This effect is being dampened by a continued decline in foreign producer prices. The impacts of changes to indirect taxes were in line with the forecast.
The released data continue to confirm low inflation in the Czech economy this year. According to the CNB forecast, inflation will gradually increase. It will hit the 2% target at the monetary policy horizon and be slightly above it in 2017. This will reflect a subsiding of the anti-inflationary effect of import prices, which are currently decreasing due to a fall in producer prices in the euro area and in global commodity prices. Import prices will be slightly inflationary in the second half of next year. The growing domestic economy will foster higher costs and consequently higher consumer prices over the entire forecast horizon, mainly via accelerating wage growth and rising prices of other inputs.
The above forecast assumes that the exchange rate will be used as a monetary policy instrument until the end of 2016. During 2015, the Bank Board has repeatedly stated that the CNB will not discontinue the use of the exchange rate as a monetary policy instrument before the second half of 2016. According to the Bank Board’s assessment, a need to maintain significantly expansionary monetary conditions persists. The likelihood that it will be necessary to discontinue the exchange rate commitment earlier than assumed in the forecast is decreasing over time. In this context, the Bank Board at its most recent meeting discussed extending the duration of the exchange rate commitment. It agreed that its discontinuation would probably shift to around the end of 2016.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the October 2015 inflation figures
Inflation comes in slightly below the CNB forecast in October
According to figures released today, the price level increased by 0.2% year on year in October 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 0.1% year on year in October. Inflation is thus still well below the CNB’s target, or below the lower boundary of the tolerance band around the target.
Annual headline inflation was 0.2 percentage point lower in October than forecasted by the CNB. This deviation was due predominantly to food prices, whose annual growth in October was lower than expected by the CNB. A somewhat deeper-than-forecasted annual decline in administered prices and fuel prices acted in the same direction, albeit to a lesser extent. Slightly faster adjusted inflation excluding fuels, which have started to rise again slowly in recent months, affected the deviation in the opposite direction. This indicator of core inflation is being affected by growth of the domestic economy and wages and by depreciation of the koruna against the dollar. This effect is being dampened by a continued decline in foreign producer prices. The impacts of changes to indirect taxes were in line with the forecast.
The released data continue to confirm low inflation in the Czech economy this year. According to the CNB forecast, inflation will gradually increase. It will hit the 2% target at the monetary policy horizon and be slightly above it in 2017. This will reflect a subsiding of the anti-inflationary effect of import prices, which are currently decreasing due to a fall in producer prices in the euro area and in global commodity prices. Import prices will be slightly inflationary in the second half of next year. The growing domestic economy will foster higher costs and consequently higher consumer prices over the entire forecast horizon, mainly via accelerating wage growth and rising prices of other inputs.
The above forecast assumes that the exchange rate will be used as a monetary policy instrument until the end of 2016. During 2015, the Bank Board has repeatedly stated that the CNB will not discontinue the use of the exchange rate as a monetary policy instrument before the second half of 2016. According to the Bank Board’s assessment, a need to maintain significantly expansionary monetary conditions persists. The likelihood that it will be necessary to discontinue the exchange rate commitment earlier than assumed in the forecast is decreasing over time. In this context, the Bank Board at its most recent meeting discussed extending the duration of the exchange rate commitment. It agreed that its discontinuation would probably shift to around the end of 2016.
Tomáš Holub, Executive Director, Monetary Department