According to figures released today, the price level
increased by 16.7 % year on year in February 2023. Inflation
slowed compared to January but remained well above the upper
boundary of the tolerance band around the CNB’s target. Consumer
prices adjusted for the first-round effects of changes to
indirect taxes also rose by 16.7% year on year in February.
The February inflation figure was 0.2 percentage point
higher than expected in the CNB’s winter forecast. Core
inflation was in line with the forecast, whereas it slowed
slightly year on year compared to the previous month. Part of
the expected annual repricing of goods and services was probably
only reflected in February, and the previous downward deviation
from the forecast in this consumer price segment has
disappeared. As at the very start of the year, administered
price inflation lagged somewhat behind the forecast in February.
Conversely, food price inflation was considerably faster than
forecasted. Fuel prices were also slightly higher. The
first-round effects of changes to indirect taxes, capturing the
impact of the increase in excise duty on tobacco on the prices
of cigarettes, have so far been negligible.
February 2023 year-on-year in %
MPR Winter 2023 actual value
CPI 16.5 16.7
Administered prices 34.7 32.8
First-round impacts of 0.1 0.0
changes to indirect taxes
Adjusted for changes to
indirect taxes
Prices of food, beverages, 16.2 18.3
tobacco
Core inflation 12.1 12.1
Fuel prices -0.8 1.9
Monetary policy-relevant 16.4 16.7
inflation
The increase in administered prices remains strong, despite
the government price cap on electricity and gas valid from the
start of the year. Compared to January, however, administered
price inflation slowed slightly, which was due to a cut in
prices of energy supplies by some distributors to below the
price cap. Core inflation eased further in February 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 services slowed further and the
contribution of the costs of owner-occupied housing in the form
of imputed rent decreased further. Food prices continue to rise
apace. This is connected with previous pronounced growth in
agricultural and food commodity prices both globally and on the
domestic market. Fuel price inflation declined further year on
year in February, reflecting oil market developments and a
strengthening koruna.
This is what the winter forecast expected, i.e. inflation is
starting to decline significantly after a temporary acceleration
in inflation in early 2023, linked mainly with a marked increase
in administered price inflation. Inflation will fall to single
digits in the second half of the year. The market components of
inflation will moderate due to decreasing cost pressures from
the foreign and domestic economies. At the same time, the
recently peaking profit margins of domestic producers, retailers
and service providers will undergo a gradual correction. In
early 2024, both headline and monetary policy-relevant inflation
will decline close to the 2% target. This will be also fostered
by tightened CNB monetary policy.
(Reporting by Prague newsroom)
