The CNB comments on the August 2014 inflation figures
Inflation remains slightly above CNB forecast in August
According to figures released today, the price level increased by 0.6% year on year in August 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes reached 0.5% year on year in August. Inflation was thus below the lower boundary of the tolerance band around the CNB’s target.
As in July, annual headline inflation was 0.2 percentage point higher in August than forecasted by the CNB. In August, as in the previous month, the deviation from the forecast was due to higher annual food price growth and a smaller fall in administered prices. Adjusted inflation excluding fuels was in line with the forecast, reflecting the weakening of the koruna at the end of last year, which is also contributing to renewed marked growth in the domestic economy and nominal wages. The effects of changes to indirect taxes were also in line with the CNB forecast in August. Annual fuel price inflation was slightly below the forecast.
The published data continue to confirm the CNB’s opinion that the decision made in November to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation. The weakened exchange rate has so far been feeding through to inflation mainly via higher import prices, but it is also contributing to growth in the domestic economy. Its previous long-term anti-inflationary effect has thus faded quickly so far this year, thanks also to the easy monetary conditions. According to the current forecast, headline inflation will start rising gradually in 2014 Q3 and return to the 2% target in 2015 H2. It will then stay close to the target in 2016. The inflationary effect of import prices will fade this year owing to subdued inflation abroad amid a stable exchange rate of the koruna. The domestic economy starts to foster a rise in inflation in the second half of this year.
Tomáš Holub, Executive Director, Monetary and Statistics Department
The CNB comments on the August 2014 inflation figures
Inflation remains slightly above CNB forecast in August
According to figures released today, the price level increased by 0.6% year on year in August 2014. Consumer price inflation adjusted for the first-round effects of changes to indirect taxes reached 0.5% year on year in August. Inflation was thus below the lower boundary of the tolerance band around the CNB’s target.
As in July, annual headline inflation was 0.2 percentage point higher in August than forecasted by the CNB. In August, as in the previous month, the deviation from the forecast was due to higher annual food price growth and a smaller fall in administered prices. Adjusted inflation excluding fuels was in line with the forecast, reflecting the weakening of the koruna at the end of last year, which is also contributing to renewed marked growth in the domestic economy and nominal wages. The effects of changes to indirect taxes were also in line with the CNB forecast in August. Annual fuel price inflation was slightly below the forecast.
The published data continue to confirm the CNB’s opinion that the decision made in November to start using the exchange rate as an additional monetary policy instrument contributed significantly to averting the threat of deflation. The weakened exchange rate has so far been feeding through to inflation mainly via higher import prices, but it is also contributing to growth in the domestic economy. Its previous long-term anti-inflationary effect has thus faded quickly so far this year, thanks also to the easy monetary conditions. According to the current forecast, headline inflation will start rising gradually in 2014 Q3 and return to the 2% target in 2015 H2. It will then stay close to the target in 2016. The inflationary effect of import prices will fade this year owing to subdued inflation abroad amid a stable exchange rate of the koruna. The domestic economy starts to foster a rise in inflation in the second half of this year.
Tomáš Holub, Executive Director, Monetary and Statistics Department