The CNB comments on the July 2015 inflation figures
Inflation comes in slightly below the CNB forecast in July owing to food prices
According to figures released today, the price level increased by 0.5% year on year in July 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by just 0.3% year on year in July. 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 July than forecasted by the CNB. This deviation was due solely to food prices, which have been relatively volatile in recent months. Whereas in previous months these prices had surprisingly shown higher-than-expected growth, they decreased unexpectedly in July on account of a marked fall in prices of vegetables in both month-on-month and year-on-year terms. Adjusted inflation excluding fuels stayed at 1.1% year on year in line with the forecast. Several contrary factors offsetting each other have been affecting this core inflation indicator recently. The upside factors include growth in the domestic economy and wages and depreciation of the koruna against the dollar, while the fading of the direct effect of the weakened koruna-euro exchange rate and the continuing decline in foreign producer prices are the downside factors. The forecast for administered prices and the effects of changes to indirect taxes on inflation materialised, and fuel prices also deviated only slightly from the forecast.
The released data continue to confirm low inflation in the Czech economy this year. According to the CNB forecast, published at the end of last week, headline and monetary policy-relevant inflation will rise until the start of next year. However, they will then dip temporarily and will thus still be below the 2% target at the monetary policy horizon. They will not be near the target until 2017. The overall upward cost pressures on consumer prices will increase gradually. However, the current decline in euro area producer prices coupled with a fall in global prices of energy commodities and the recent appreciation of the koruna-euro exchange rate will continue to substantially reduce the costs stemming from import prices. In this respect, the recent exchange rate appreciation is an unfavourable factor postponing achievement of the inflation target. The anti-inflationary effect of import prices will subside in mid-2016 in connection with the expected return of energy commodity prices and euro area industrial producer prices to annual growth. Costs in the domestic economy will continue to increase due mainly to accelerating wage growth amid continued growth in economic activity.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the July 2015 inflation figures
Inflation comes in slightly below the CNB forecast in July owing to food prices
According to figures released today, the price level increased by 0.5% year on year in July 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by just 0.3% year on year in July. 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 July than forecasted by the CNB. This deviation was due solely to food prices, which have been relatively volatile in recent months. Whereas in previous months these prices had surprisingly shown higher-than-expected growth, they decreased unexpectedly in July on account of a marked fall in prices of vegetables in both month-on-month and year-on-year terms. Adjusted inflation excluding fuels stayed at 1.1% year on year in line with the forecast. Several contrary factors offsetting each other have been affecting this core inflation indicator recently. The upside factors include growth in the domestic economy and wages and depreciation of the koruna against the dollar, while the fading of the direct effect of the weakened koruna-euro exchange rate and the continuing decline in foreign producer prices are the downside factors. The forecast for administered prices and the effects of changes to indirect taxes on inflation materialised, and fuel prices also deviated only slightly from the forecast.
The released data continue to confirm low inflation in the Czech economy this year. According to the CNB forecast, published at the end of last week, headline and monetary policy-relevant inflation will rise until the start of next year. However, they will then dip temporarily and will thus still be below the 2% target at the monetary policy horizon. They will not be near the target until 2017. The overall upward cost pressures on consumer prices will increase gradually. However, the current decline in euro area producer prices coupled with a fall in global prices of energy commodities and the recent appreciation of the koruna-euro exchange rate will continue to substantially reduce the costs stemming from import prices. In this respect, the recent exchange rate appreciation is an unfavourable factor postponing achievement of the inflation target. The anti-inflationary effect of import prices will subside in mid-2016 in connection with the expected return of energy commodity prices and euro area industrial producer prices to annual growth. Costs in the domestic economy will continue to increase due mainly to accelerating wage growth amid continued growth in economic activity.
Tomáš Holub, Executive Director, Monetary Department