T. Holub – Surging inflation and the CNB’s response

Surging inflation and the CNB's response

Tomáš Holub

CNB Board Member

CEEMEA Opportunities Conference

CE3 Macro: The consequences of rising inflation

January 20, 2022

Latest monetary policy decision

• The CNB Bank Board increased the 2W repo rate by one percentage point to 3.75% at its latest meeting on December 22, 2021. Five members voted in favor of this decision.
• Consistent with the autumn 2021 forecast is a sharp rise in market interest rates at the start of 2022.
• The Bank Board assessed the risks and uncertainties of the autumn 2021 forecast as being markedly inflationary overall and hence requiring faster monetary policy tightening.
• The next policy meeting along with a new winter 2022 forecast will take place on February 3, 2022.

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Inflation above the autumn forecast in 2021Q4

• Inflation continued to move well above the upper

boundary of the tolerance band.

• Inflation was 3.8% in 2021 as a whole, the highest level since 2008.

• Inflation reached 6.1% in 2021Q4 (6.6% in Dec) compared to 5.3% in the autumn forecast. The deviation was mainly due to core inflation.

• According to the autumn forecast, inflation will rise further in the winter months. It will start to ease in

the course of this year and will decrease close

to the 2% target over the monetary policy horizon.

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Structure of inflation

• Core inflation continues to accelerate, exhibiting the highest contributions to the inflation surge on the back of strong domestic and foreign demand, supply chain disruptions and imputed rent.

• Besides domestic demand pressures, growth in global agricultural commodity prices is contributing to rising food prices.

• Currently high fuel price inflation reflects high global oil prices.

• Administered prices experienced a year-on-

year decline overall in December, due to a
temporary waiver of VAT on electricity and
natural gas.	4

Core inflation components

• Tradable and non-tradable price growth increased, suggesting contribution of both foreign and domestic inflationary pressures.
• The significant contribution of imputed rent to non-tradableprice inflation reflects sharp growth in

property prices and increasing construction prices.

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