Inflation picks up slightly in September 2022

The CNB comments on the September 2022 inflation figures

According to figures released today, the price level increased by 18% year on year in September 2022. Inflation thus accelerated slightly compared to August 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 17.9% year on year in September. The year-on-year increase in consumer prices in September was more than two percentage points smaller than expected in the CNB’s summer forecast, due to all components of inflation except changes to indirect taxes. As in previous months, food prices and, to a lesser extent, core inflation, fuel prices and administered prices contributed most significantly to the deviation of annual inflation in September from the forecast. 

Core inflation did not increase further in August and September, but it remains high. It reflects the previous peak in domestic demand pressures and continued strong growth in costs. The latter is due to escalating gas and electricity prices on international exchanges and persisting problems in global value chains. The effect of the fading post-Covid recovery of domestic demand is especially visible in goods prices, which accelerated further. Growth in services prices within core inflation was broadly flat in September. The contribution of the cost of owner-occupied housing in the form of imputed rent, which had previously been exceptionally high, declined slightly during Q3. By contrast, a further slight pick-up in administered price inflation reflects continued growth in energy bills for households, which, however, was again slightly lower in September than forecasted. The increase in energy prices on exchanges to exceptional highs was driven by persisting high uncertainty regarding future gas supplies from Russia, which continues its aggression in Ukraine and has stopped supplies to the EU through the Nord Stream 1 pipeline. The war is also reflected in a continued rise in food prices due to soaring prices of agricultural commodities, fuelled by increasing energy costs and by the role of Ukraine in global wheat production. An easing of growth in fuel prices in August and September reflected a correction in oil prices and a drop in margins and prices (especially of petrol) at refineries and filling stations. 

The observed data confirm a peak in inflation, which the CNB forecast predicted in the second half of 2022. The evolution of inflation in Q3 signals the possibility of inflation peaking at a somewhat lower level than expected. A moderation of price growth will be fostered in the subsequent period by an easing of the dynamics of production costs, a decline in households’ purchasing power, and the stabilising effect of the previous monetary policy tightening helping to cool domestic demand. According to the forecast, the downward trend in inflation will become stronger in the course of next year due to the above-mentioned factors. 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 summer forecast. 

Petr Král, Executive Director, Monetary Department