Inflation picks up pace in November 2022

The CNB comments on the November 2022 inflation figures

According to figures released today, the price level increased by 16.2% year on year in November 2022. Inflation thus picked up compared to October 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 14.8% year on year in November. The November inflation figure was more than two percentage points lower than expected in the CNB’s autumn forecast. The negative deviation was due mainly to administered prices, which reflected a fall in electricity prices in October due to the statistical inclusion of the energy savings tariff. This effect was not included explicitly in the CNB’s forecast. The slowdown in fuel price inflation in November was more pronounced than the autumn forecast had expected. Core inflation also slowed somewhat more markedly than expected. By contrast, food price inflation was significantly higher. The first-round effects of changes to indirect taxes were in line with the forecast. 

As in the previous month, the inflation figure for November was affected significantly by the inclusion of government measures to help with high energy prices in inflation. Without these measures (an energy savings tariff approved until the end of 2022 and a waiver of the renewable sources fee until the end of 2023), inflation would have been 3.6 percentage points higher in November. The CNB’s autumn forecast had expected inflation to pick up in November compared to October, as headline inflation was affected by the effect of last year’s low comparison base due to the waiver of VAT on electricity and natural gas in the last two months of the year.

Core inflation declined in November but remains high, reflecting a gradual fading of foreign industrial producer price inflation and a dampening of domestic demand. In November, goods prices within core inflation slowed for the first time in a long time and growth in services prices continued to ease on account of a further drop in the contribution of owner-occupied housing in the form of imputed rent. However, food price inflation accelerated further. This was fostered by high agricultural commodity prices and domestic agricultural producer prices, reflecting both the rising energy costs and other economic impacts of the war in Ukraine. The growth in fuel prices eased further year on year in November owing to oil market developments and a fall in margins in the processing and distribution chain. Overall, this led to a decline in prices at filling stations during November. 

Year-on-year price growth will remain volatile in the next few months around the turn of the year. The inclusion of the energy savings tariff in inflation is noticeably lowering reported inflation in the final quarter of this year by comparison with the CNB’s autumn forecast. As expected, the effect of last year’s waiver of VAT on energy for households is acting in the opposite direction. According to the forecast, the cap on electricity and gas prices effective from the start of next year, which comes after the energy savings tariff, will partly dampen administered price inflation. The other inflation components will slow. Around mid-2023, inflation will fall to single-digit levels thanks to a continued easing of cost pressures, a cooling of foreign economic growth as well as of domestic demand and the labour market, reflecting among other things tighter monetary policy. Inflation will return close to the CNB’s 2% target over the monetary policy horizon, i.e. in the first half of 2024 for the autumn forecast. 

Petr Král, Executive Director, Monetary Department