Year-on-year inflation slowed down to 4.5% y/y in August as prices fell by 0.3% since July. Core CPI edged down to 5.5% y/y.
The CPI beat the expectations of the market, as it fell to 4.5% instead of rising to the forecasted 4.8%. The main source of the decline was another plunge in food prices by 1.5% m/m. The seasonal decline in clothing prices was also quite strong. Telecommunication fees stagnated for the sixth month in a row, which brought the y/y change down to 1.8% from 2.4% in July. The overall momentum of prices is low; out of the 12 basic headings, the y/y change declined in 7 and stagnated in 2 groups. Rising fuel prices drove transportation prices higher.
Core inflation declined by 0.3% m/m. In y/y terms, it eased to 5.5% y/y from 5.6 in July.
Table: Inflation in %
VII.02 VIII.02 VIII.01
CPI m/m -0,1 -0,3 -0,2
y/y 4,6 4,5 8,7
core inflation m/m 0,6 0,3 0,0
y/y 5,6 5,5 9,4
As for September, if the rise in fuel prices is not very dramatic and the positive development of food prices does not reverse, the y/y CPI may not increase as well. Until the end of year, however, the inflation is likely to climb above 5%.
Although the central bank focuses at future risks rather than at the current development of inflation, the August broad based decline in inflation postpones the risk of another rate hike further towards the end of this year.
Jakub Dvorak, Investment Research, CSOB