The CNB comments on the June 2015 inflation figures
Inflation comes in above the CNB forecast in June
According to figures released today, the price level increased by 0.8% year on year in June 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 0.6% year on year in June. Inflation is thus still below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.4 percentage point higher in June than forecasted by the CNB. This deviation was mainly due to adjusted inflation excluding fuels, which stayed slightly above 1%, whereas the CNB had expected it to fall below this level. This implies that both the unwinding of the direct effect of the weakened exchange rate of the koruna against the euro and the still subdued inflation abroad are being offset to a larger-than-expected extent by the inflationary effect of the growing domestic economy and the weakening of the koruna against the US dollar in early 2015. The higher-than-forecasted inflation was also due to prices of food (including beverages and tobacco) and to a small extent also administered prices and fuel prices. By contrast, the effects of changes to indirect taxes were in line with expectations, reflecting on the one hand the two increases in excise duty on tobacco products implemented last year and on the other hand the introduction of a second reduced VAT rate in January 2015.
The published data continue to confirm the opinion that the decision made in November 2013 to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation. The evolution of inflation in 2015 Q2 has exceeded the expectations of the CNB, which had predicted that inflation would rise, but to a smaller extent. The CNB forecast expects that growing economic activity and accelerating wage growth will continue to foster higher inflation, whereas import prices will slow inflation significantly this year. Both headline and monetary policy-relevant inflation will thus be very low in 2015. In 2016, however, they will rise and approach the CNB’s 2% target from below as the year-on-year fall in oil prices and the deflationary tendencies in the euro area dissipate.
Tomáš Holub, Executive Director, Monetary Department
The CNB comments on the June 2015 inflation figures
Inflation comes in above the CNB forecast in June
According to figures released today, the price level increased by 0.8% year on year in June 2015. Consumer prices adjusted for the first-round effects of changes to indirect taxes rose by 0.6% year on year in June. Inflation is thus still below the lower boundary of the tolerance band around the CNB’s target.
Annual headline inflation was 0.4 percentage point higher in June than forecasted by the CNB. This deviation was mainly due to adjusted inflation excluding fuels, which stayed slightly above 1%, whereas the CNB had expected it to fall below this level. This implies that both the unwinding of the direct effect of the weakened exchange rate of the koruna against the euro and the still subdued inflation abroad are being offset to a larger-than-expected extent by the inflationary effect of the growing domestic economy and the weakening of the koruna against the US dollar in early 2015. The higher-than-forecasted inflation was also due to prices of food (including beverages and tobacco) and to a small extent also administered prices and fuel prices. By contrast, the effects of changes to indirect taxes were in line with expectations, reflecting on the one hand the two increases in excise duty on tobacco products implemented last year and on the other hand the introduction of a second reduced VAT rate in January 2015.
The published data continue to confirm the opinion that the decision made in November 2013 to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation. The evolution of inflation in 2015 Q2 has exceeded the expectations of the CNB, which had predicted that inflation would rise, but to a smaller extent. The CNB forecast expects that growing economic activity and accelerating wage growth will continue to foster higher inflation, whereas import prices will slow inflation significantly this year. Both headline and monetary policy-relevant inflation will thus be very low in 2015. In 2016, however, they will rise and approach the CNB’s 2% target from below as the year-on-year fall in oil prices and the deflationary tendencies in the euro area dissipate.
Tomáš Holub, Executive Director, Monetary Department