The CNB comments on the May 2008 inflation figures
Inflation remains unchanged from April and is close to CNB forecast
According to figures released today, annual inflation was 6.8% in May 2008, remaining unchanged from April. 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 (4.6% year on year in May), i.e. inflation adjusted for the first-round effects of changes to indirect taxes, also continued to fluctuate above the upper boundary of the inflation-target tolerance band. The first-round effects of changes to indirect taxes contributed more than two percentage points to headline inflation in May. The May figures confirm the assumption that both indicators of inflation have now peaked.
In month-on-month terms, the price level increased by 0.5% in May 2008. This was mainly a result of higher fuel and food prices, with price increases for some items (especially vegetables, including potatoes, rice, flour and vegetable oils) outweighing the declines in other prices (e.g. bread, eggs, cheese and butter). The month-on-month change in the price level was also due to growth in housing prices.
Annual inflation in May 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 growth in fuel prices and slightly higher adjusted inflation excluding fuels, which was partly dampened by lower food price growth compared to the forecast. Given the strong exchange rate of the koruna, the higher adjusted inflation may suggest persisting inflationary pressures from the domestic economy.
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 the 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 May 2008 inflation figures
Inflation remains unchanged from April and is close to CNB forecast
According to figures released today, annual inflation was 6.8% in May 2008, remaining unchanged from April. 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 (4.6% year on year in May), i.e. inflation adjusted for the first-round effects of changes to indirect taxes, also continued to fluctuate above the upper boundary of the inflation-target tolerance band. The first-round effects of changes to indirect taxes contributed more than two percentage points to headline inflation in May. The May figures confirm the assumption that both indicators of inflation have now peaked.
In month-on-month terms, the price level increased by 0.5% in May 2008. This was mainly a result of higher fuel and food prices, with price increases for some items (especially vegetables, including potatoes, rice, flour and vegetable oils) outweighing the declines in other prices (e.g. bread, eggs, cheese and butter). The month-on-month change in the price level was also due to growth in housing prices.
Annual inflation in May 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 growth in fuel prices and slightly higher adjusted inflation excluding fuels, which was partly dampened by lower food price growth compared to the forecast. Given the strong exchange rate of the koruna, the higher adjusted inflation may suggest persisting inflationary pressures from the domestic economy.
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 the low values consistent with the CNB’s targets in late 2008/early 2009.
Tomáš Holub, Executive Director, Monetary and Statistics Department