The January inflation figure was just 0.1 percentage point lower than the CNB’s winter forecast. Administered prices rose somewhat more slowly than predicted. Core inflation recorded a sharper slowdown compared with the forecast, whereas food prices increased more rapidly. Fuel prices slowed further in line with the forecast. The assumption regarding the first-round effects of changes to indirect taxes materialised.
The exceptionally high January increase in administered prices
largely reflects a rise in electricity prices due to the
discontinuation of the energy savings tariff, which was replaced by
a government cap on electricity prices. Core inflation eased further
in January but remains high, reflecting a gradual fading of foreign
industrial producer price inflation and a dampening of domestic
demand. Within core inflation, growth in prices of both goods and
services slowed further. The slowdown in services prices was aided
by a further drop in the contribution of the costs of owner-occupied
housing in the form of imputed rent. Food prices continue to rise
apace. This is connected with previous strong growth in agricultural
commodity prices and domestic agricultural producer prices. Fuel
price inflation declined further year on year in January, reflecting
oil market developments and a strengthening koruna.
January 2023 Central Actual
bank data
forecast
CPI 17.6 17.5
Administered prices 37.0 35.7
First-round impacts of changes to indirect taxes 0.0 0.0
Adjusted for changes to indirect taxes
Prices of food, beverages, tobacco 17.0 18.7
Core inflation 12.9 12.3
Fuel prices 3.2 4.6
Monetary policy-relevant inflation 17.6 17.5
The winter forecast expects the acceleration of inflation in
early 2023 to be temporary and linked mainly with a marked increase
in administered price inflation. Inflation will then start to
decrease rapidly, falling to single digits in the second half of
this year. The market components of inflation will decline due to
decreasing cost pressures from both the foreign and domestic
economies. At the same time, the currently peaking profit margins of
domestic producers, retailers and service providers will undergo a
gradual correction. At the start of 2024, both headline and monetary
policy-relevant inflation will decline close to the CNB’s 2% target,
where they will stay until the end of the forecast horizon. Tighter
monetary policy will contribute to this decline.
(Prague Newsroom)
