The CNB comments on the April 2008 inflation figures
Inflation slowed further in April and is close to CNB forecast
According to figures released today, annual inflation reached 6.8% in April 2008, down by 0.3 percentage point compared to March. This means that it was again well above the upper boundary of the tolerance band set by the CNB around its target of 3%. Monetary-policy relevant inflation (4.7% year on year in April), i.e. inflation adjusted for the still sizeable first-round effects of changes to indirect taxes (more than 2 percentage points in April), also remained above the upper boundary of the inflation-target tolerance band. However, the April figures confirm the assumption that both these inflation indicators have now peaked and their deviation from the CNB’s target has decreased slightly further.
In month-on-month terms, the price level rose by 0.4% in April 2008, mostly due to a rise in natural gas and heat prices. Prices of food and beverages rebounded after two months of decline, as the relatively pronounced growth in prices of some items (flour, vegetable oils, alcoholic beverages, etc.) outweighed the decrease in prices of some other food items (e.g. bread and eggs). The month-on-month change in the price level was also affected by a seasonal increase in prices of clothing and footwear and by a decline in package holiday prices.
Annual inflation in April 2008 was 0.1 percentage point higher than the current CNB forecast (6.7%). According to preliminary calculations, this minor deviation was due to higher-than-expected adjusted inflation excluding fuels, which, given the strong exchange rate of the koruna, may suggest persisting inflationary pressures from the domestic economy. The effect of the higher adjusted inflation was partly offset by a lower-than-forecasted rise in food prices.
The current high inflation can still be evaluated as a temporary fluctuation generated above all by tax changes, increasing regulated prices (including the introduction of fees in health care) and the exceptionally high food price growth at the end of last year. Once this fluctuation has unwound, inflation should fall back to low values consistent with the CNB’s targets in late 2008/early 2009.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the April 2008 inflation figures
Inflation slowed further in April and is close to CNB forecast
According to figures released today, annual inflation reached 6.8% in April 2008, down by 0.3 percentage point compared to March. This means that it was again well above the upper boundary of the tolerance band set by the CNB around its target of 3%. Monetary-policy relevant inflation (4.7% year on year in April), i.e. inflation adjusted for the still sizeable first-round effects of changes to indirect taxes (more than 2 percentage points in April), also remained above the upper boundary of the inflation-target tolerance band. However, the April figures confirm the assumption that both these inflation indicators have now peaked and their deviation from the CNB’s target has decreased slightly further.
In month-on-month terms, the price level rose by 0.4% in April 2008, mostly due to a rise in natural gas and heat prices. Prices of food and beverages rebounded after two months of decline, as the relatively pronounced growth in prices of some items (flour, vegetable oils, alcoholic beverages, etc.) outweighed the decrease in prices of some other food items (e.g. bread and eggs). The month-on-month change in the price level was also affected by a seasonal increase in prices of clothing and footwear and by a decline in package holiday prices.
Annual inflation in April 2008 was 0.1 percentage point higher than the current CNB forecast (6.7%). According to preliminary calculations, this minor deviation was due to higher-than-expected adjusted inflation excluding fuels, which, given the strong exchange rate of the koruna, may suggest persisting inflationary pressures from the domestic economy. The effect of the higher adjusted inflation was partly offset by a lower-than-forecasted rise in food prices.
The current high inflation can still be evaluated as a temporary fluctuation generated above all by tax changes, increasing regulated prices (including the introduction of fees in health care) and the exceptionally high food price growth at the end of last year. Once this fluctuation has unwound, inflation should fall back to low values consistent with the CNB’s targets in late 2008/early 2009.
Tomáš Holub, Executive Director, Monetary and Statistics Department