The CNB comments on the June 2008 inflation figures
Inflation in line with CNB forecast in June
According to figures released today, annual inflation reached 6.7% in June 2008, down by 0.1 percentage point compared to May. 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 (4.5% 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 June.
In month-on-month terms, the price level increased by 0.2% in June 2008. This was mainly a result of a further increase in fuel prices. In addition, package holiday prices rose due to the onset of the summer season and prices of housing-related services picked up as well. Prices of some food items also increased, including potatoes as a result of the usual seasonal change from old to new potatoes. On the other hand, prices of fruiting vegetables, bread, eggs, milk and dairy products decreased. A decline in prices of cars, motorcycles, mobile phones and electronics also had a downward effect on consumer prices.
Annual inflation in June 2008 was in line with the current CNB forecast. According to preliminary calculations, higher-than-expected fuel price growth was offset by lower food price inflation amid only slightly higher adjusted inflation excluding fuels compared to the forecast. Regulated prices and the effects of changes to indirect taxes were in line with the forecast.
Although inflation was in line with the CNB forecast in June, it probably cannot be expected to decline steadily over the next few months as previously assumed by the CNB. This is because inflation is likely to be adversely affected in the next few months by the unexpectedly strong oil price growth on world markets. This will feed through to continuing growth in fuel prices and to an increase in regulated prices of natural gas as from 1 July, which has already been announced by the Energy Regulatory Office. Greater pass-through of higher excise duties to cigarette prices will affect inflation in the same direction. As a result, inflation will probably return temporarily above 7% in the summer and autumn months. However, it will return to its downward path at the end of the year and is expected to fall back to low levels corresponding to the CNB’s targets in 2009. This will be aided, among other things, by the current rapid appreciation of the koruna, which is beginning to have a strong anti-inflationary effect.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the June 2008 inflation figures
Inflation in line with CNB forecast in June
According to figures released today, annual inflation reached 6.7% in June 2008, down by 0.1 percentage point compared to May. 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 (4.5% 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 June.
In month-on-month terms, the price level increased by 0.2% in June 2008. This was mainly a result of a further increase in fuel prices. In addition, package holiday prices rose due to the onset of the summer season and prices of housing-related services picked up as well. Prices of some food items also increased, including potatoes as a result of the usual seasonal change from old to new potatoes. On the other hand, prices of fruiting vegetables, bread, eggs, milk and dairy products decreased. A decline in prices of cars, motorcycles, mobile phones and electronics also had a downward effect on consumer prices.
Annual inflation in June 2008 was in line with the current CNB forecast. According to preliminary calculations, higher-than-expected fuel price growth was offset by lower food price inflation amid only slightly higher adjusted inflation excluding fuels compared to the forecast. Regulated prices and the effects of changes to indirect taxes were in line with the forecast.
Although inflation was in line with the CNB forecast in June, it probably cannot be expected to decline steadily over the next few months as previously assumed by the CNB. This is because inflation is likely to be adversely affected in the next few months by the unexpectedly strong oil price growth on world markets. This will feed through to continuing growth in fuel prices and to an increase in regulated prices of natural gas as from 1 July, which has already been announced by the Energy Regulatory Office. Greater pass-through of higher excise duties to cigarette prices will affect inflation in the same direction. As a result, inflation will probably return temporarily above 7% in the summer and autumn months. However, it will return to its downward path at the end of the year and is expected to fall back to low levels corresponding to the CNB’s targets in 2009. This will be aided, among other things, by the current rapid appreciation of the koruna, which is beginning to have a strong anti-inflationary effect.
Tomáš Holub, Executive Director, Monetary and Statistics Department