10. 2. 2023

Inflation in line with the forecast in January 2023

The CNB comments on the January 2023 inflation figures

According to figures released today, the price level increased by 17.5% year on year in January 2023. Inflation accelerated compared with December, due largely to the discontinuation of the energy savings tariff for households (in the form of a contribution towards energy bills) and 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 rose by 17.5% year on year in January. 

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. 

January 2023 year-on-year in %
MPR Winter 2023 actual value
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 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. 

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. 

Luboš Komárek, Deputy Executive Director, Monetary Department