The CNB comments on the January 2005 inflation figures
Forecast of inflation slowdown confirmed
According to figures released today, consumer prices increased by 1.7 % year on year in January
this year. This confirms the forecast that annual inflation would slow down significantly to the 2%
level at the beginning of this year. The decline in inflation was in fact rather more pronounced
than the CNB had predicted in its latest forecast.
In January, prices are always affected by strong seasonality. This shows up as marked
month-on-month movements in the prices of some items of the consumer basket. These are primarily
regulated prices such as housing or health service prices, which in January rose slightly more than
forecasted by the CNB.
To assess inflation in January it is thus more appropriate to monitor the annual figures. One of
the factors that will push inflation down in the first few months of this year is the fact that
last year's tax changes will drop out from the annual index. This factor came into play in January,
when it was reinforced by the minor effect of the regrading of sports-related services to the lower
VAT rate. Food prices also recorded slower growth, due, among other things, to last year's good
harvest. At the end of 2004, this factor had affected prices to a lesser extent than expected by
the CNB, but in January this year food prices showed a greater-than-forecasted slowdown. This
confirms the high volatility and hard-to-predict nature of this component of inflation. Inflation
declined in other price categories as well, indicating a still anti-inflationary demand environment
in the economy and the effects of the appreciation of the koruna.
Tomáš Holub Executive Director, Monetary and Statistics Department
The CNB comments on the January 2005 inflation figures
Forecast of inflation slowdown confirmed
According to figures released today, consumer prices increased by 1.7 % year on year in January this year. This confirms the forecast that annual inflation would slow down significantly to the 2% level at the beginning of this year. The decline in inflation was in fact rather more pronounced than the CNB had predicted in its latest forecast.
In January, prices are always affected by strong seasonality. This shows up as marked month-on-month movements in the prices of some items of the consumer basket. These are primarily regulated prices such as housing or health service prices, which in January rose slightly more than forecasted by the CNB.
To assess inflation in January it is thus more appropriate to monitor the annual figures. One of the factors that will push inflation down in the first few months of this year is the fact that last year's tax changes will drop out from the annual index. This factor came into play in January, when it was reinforced by the minor effect of the regrading of sports-related services to the lower VAT rate. Food prices also recorded slower growth, due, among other things, to last year's good harvest. At the end of 2004, this factor had affected prices to a lesser extent than expected by the CNB, but in January this year food prices showed a greater-than-forecasted slowdown. This confirms the high volatility and hard-to-predict nature of this component of inflation. Inflation declined in other price categories as well, indicating a still anti-inflationary demand environment in the economy and the effects of the appreciation of the koruna.
Tomáš Holub
Executive Director, Monetary and Statistics Department