The CNB comments on the November 2011 inflation figures
Inflation comes in above CNB forecast in November
According to figures released today, the price level rose by 2.5% year on year in November 2011. Annual headline inflation thus rose slightly compared to October. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, increased to 2.5% in November and is therefore in the upper half of the tolerance band around the inflation target.
Annual headline inflation was 0.5 percentage point higher in November this year than the CNB’s current forecast. The upward deviation from the forecast was largely due to food prices. In the last two months, the effect of the increase in the reduced VAT rate, which will take place in January 2012, has probably started to affect food prices in advance. Tax changes have had a similar advance effect on prices in some cases in the past. If this is the case this time as well, the currently faster-than-expected food price inflation will be offset at the start of next year and inflation will not show a sudden rise due to the VAT rate change as previously expected. Adjusted inflation excluding fuels and fuel prices were also slightly higher this November than the CNB had been expecting.
Overall, the figures released today represent an only modest inflationary risk to the forecast and do not cast much doubt on the CNB’s view. The CNB’s assessment of the situation in the past period is that inflationary pressures from the domestic economy were not significant and that commodity and food prices – probably joined by the exchange rate in recent months – were still the main sources of inflation. According to the CNB forecast, headline inflation will rise temporarily to just below 3% in 2012 due to the VAT increase and fall below the target at the start of 2013. Monetary-policy relevant inflation will be slightly below the target in both 2012 and 2013.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the November 2011 inflation figures
Inflation comes in above CNB forecast in November
According to figures released today, the price level rose by 2.5% year on year in November 2011. Annual headline inflation thus rose slightly compared to October. Monetary-policy relevant inflation, i.e. inflation adjusted for the first-round effects of changes to indirect taxes, increased to 2.5% in November and is therefore in the upper half of the tolerance band around the inflation target.
Annual headline inflation was 0.5 percentage point higher in November this year than the CNB’s current forecast. The upward deviation from the forecast was largely due to food prices. In the last two months, the effect of the increase in the reduced VAT rate, which will take place in January 2012, has probably started to affect food prices in advance. Tax changes have had a similar advance effect on prices in some cases in the past. If this is the case this time as well, the currently faster-than-expected food price inflation will be offset at the start of next year and inflation will not show a sudden rise due to the VAT rate change as previously expected. Adjusted inflation excluding fuels and fuel prices were also slightly higher this November than the CNB had been expecting.
Overall, the figures released today represent an only modest inflationary risk to the forecast and do not cast much doubt on the CNB’s view. The CNB’s assessment of the situation in the past period is that inflationary pressures from the domestic economy were not significant and that commodity and food prices – probably joined by the exchange rate in recent months – were still the main sources of inflation. According to the CNB forecast, headline inflation will rise temporarily to just below 3% in 2012 due to the VAT increase and fall below the target at the start of 2013. Monetary-policy relevant inflation will be slightly below the target in both 2012 and 2013.
Tomáš Holub, Executive Director, Monetary and Statistics Department