Inflation slows in December 2022

The CNB comments on the December 2022 inflation figures

According to figures released today, the price level increased by 15.8% year on year in December 2022. Inflation thus slowed compared to November 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 rose by 14.4% year on year in December. The average inflation rate for 2022 as a whole was 15.1%.

The December inflation figure was more than three percentage points lower than expected in the CNB’s autumn forecast. As in the previous two months, the negative deviation from the forecast in December was due predominantly 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 December 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 at the close of last year. The first-round effects of changes to indirect taxes were in line with the forecast. 

The December year-on-year inflation figure would have been 3.5 percentage points higher had inflation not been affected by the statistical inclusion of government measures to help with high energy prices (an energy savings tariff approved until the end of 2022 and a waiver of the renewable sources fee until the end of 2023). 

Core inflation declined in December 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. The slowdown in services prices was aided by a further drop in the contribution of owner-occupied housing in the form of imputed rent. 

Food price inflation also moderated somewhat but remains high. This is connected with still 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 significantly further year on year in December 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 at the close of the year. 

Inflation can be expected to rise again in January, owing chiefly to the fade-out of the effect of the energy savings tariff. However, inflation should slow in the subsequent months of 2023. According to the forecast, the cap on electricity and gas prices effective from the start of this year, which comes after the energy savings tariff, will partly dampen administered price inflation. The other inflation components will slow. In the second half of the year, inflation will fall to single-digit levels thanks to a further easing of cost pressures, a cooling of foreign economic growth as well as of domestic demand and the labour market, reflecting among other things tightened 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