10. 3. 2022

Inflation comes in above the CNB forecast and well above the upper boundary of the tolerance band in February 2022

The CNB comments on the February 2022 inflation figures

According to figures released today, the price level increased by 11.1% year on year in February 2022. Inflation thus accelerated further, significantly exceeding 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 rose by 10.7% year on year in February. 

The year-on-year increase in consumer prices in February was 1.3 percentage points higher than expected in the CNB’s winter forecast. As in January, this deviation was due mainly to food prices, whose growth increased significantly further. The stronger-than-expected price growth was also due to higher administered prices as a result of growth in housing-related energy prices, and to surprisingly rapid growth in fuel prices. Core inflation was slightly higher, too. Conversely, the impact of indirect tax changes was somewhat smaller than forecasted, owing to a slightly lower effect of the reintroduction of VAT on energy in January and a more gradual pass-through into consumer prices of this year’s increase in excise duty on tobacco.

February 2022 year-on-year in %
MPR Winter 2022 actual value
CPI 9.7 11.1
Administered prices 13.7 15.6
First-round impacts of changes to indirect taxes 0.6 0.4
Adjusted for changes to indirect taxes    
Prices of food, beverages, tobacco 3.9 6.1
Core inflation 10.2 10.4
Fuel prices 25.5 31.3
Monetary policy-relevant inflation 9.2 10.7

The published figures reflect the exceptionally strong and across-the-board inflation pressures in the domestic and foreign economies observed since mid-2021. Against the backdrop of the usual repricing at the start of the year, core inflation continues to accelerate on the back of strengthening growth in prices of goods and services. Amid solid demand in the Czech economy, the latter reflects sizeable previous growth in firms’ personnel and material costs, including a marked rise in energy prices. Within core inflation, the contribution of the cost of owner-occupied housing in the form of imputed rent gained further in strength. Administered price inflation accelerated as a result of continued growth in gas, electricity and heat prices for households. Food price inflation reflects both strong domestic demand pressures and growth in world agricultural commodity prices as a result of a combination of strong global demand and supply-side constraints.

The CNB’s winter forecast expected inflation to peak at around 10% in the first half of this year and return close to the 2% target over the monetary policy horizon, i.e. in the first half of 2023. However, as a result of the war in Ukraine, which is generating extreme price pressures, especially in the area of commodities, and has also caused the koruna to depreciate, inflation is very likely to record a further noticeable, albeit temporary, increase in the months ahead.

Petr Král, Executive Director, Monetary Department