The CNB comments on the August 2008 inflation figures
Inflation below CNB forecast in August
According to figures released today, annual inflation reached 6.5% in August 2008, down by 0.4 percentage point compared to July. Nevertheless, inflation is 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 August), i.e. inflation adjusted for the first-round effects of changes to indirect taxes, continues to fluctuate above the upper boundary of the inflation-target tolerance band. The first-round effects of changes to indirect taxes thus contributed almost two percentage points to headline inflation in August.
In month-on-month terms, the price level fell by 0.1% in August, owing mainly to a decline in prices of vegetables and fruit, pasta, eggs and dairy products. Fuel prices declined, as did clothing and footwear prices as a result of continuing summer sales. By contrast, a rise in prices was recorded by tobacco products owing to the lagged impact of the increased excise duty introduced on January 2008. Seasonal prices of package holidays and net rents also rose.
Headline annual inflation in August 2008 was 0.3 percentage point lower than the CNB forecast. According to preliminary calculations, this deviation was due mainly to food and fuel prices. Conversely, adjusted inflation excluding fuel prices was slightly higher than the CNB forecast.
Although inflation was below the CNB’s forecast in August, the bank’s assumption that annual inflation would be volatile in the summer months was confirmed (see the observed rise in inflation in July and the decline in August; another slight increase in September cannot be ruled out). A trend of rapidly slowing inflation will definitively prevail in the final quarter of this year, and in 2009 inflation should fall back to levels corresponding to the CNB’s targets. This will be aided by the unwinding of the inflationary shocks observed at the turn of this year, the ongoing decline in economic growth and the recent rapid appreciation of the koruna.
Petr Vojtíšek, Deputy Executive Director, Monetary and Statistics Department
The CNB comments on the August 2008 inflation figures
Inflation below CNB forecast in August
According to figures released today, annual inflation reached 6.5% in August 2008, down by 0.4 percentage point compared to July. Nevertheless, inflation is 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 August), i.e. inflation adjusted for the first-round effects of changes to indirect taxes, continues to fluctuate above the upper boundary of the inflation-target tolerance band. The first-round effects of changes to indirect taxes thus contributed almost two percentage points to headline inflation in August.
In month-on-month terms, the price level fell by 0.1% in August, owing mainly to a decline in prices of vegetables and fruit, pasta, eggs and dairy products. Fuel prices declined, as did clothing and footwear prices as a result of continuing summer sales. By contrast, a rise in prices was recorded by tobacco products owing to the lagged impact of the increased excise duty introduced on January 2008. Seasonal prices of package holidays and net rents also rose.
Headline annual inflation in August 2008 was 0.3 percentage point lower than the CNB forecast. According to preliminary calculations, this deviation was due mainly to food and fuel prices. Conversely, adjusted inflation excluding fuel prices was slightly higher than the CNB forecast.
Although inflation was below the CNB’s forecast in August, the bank’s assumption that annual inflation would be volatile in the summer months was confirmed (see the observed rise in inflation in July and the decline in August; another slight increase in September cannot be ruled out). A trend of rapidly slowing inflation will definitively prevail in the final quarter of this year, and in 2009 inflation should fall back to levels corresponding to the CNB’s targets. This will be aided by the unwinding of the inflationary shocks observed at the turn of this year, the ongoing decline in economic growth and the recent rapid appreciation of the koruna.
Petr Vojtíšek, Deputy Executive Director, Monetary and Statistics Department