10. 3. 2023

Inflation comes in slightly above the forecast in February 2023

The CNB comments on the February 2023 inflation figures

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 changes to indirect taxes 0.1 0.0
Adjusted for changes to indirect taxes    
Prices of food, beverages, tobacco 16.2 18.3
Core inflation 12.1 12.1
Fuel prices -0.8 1.9
Monetary policy-relevant inflation 16.4 16.7

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.

Petr Král, Executive Director, Monetary Department