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Core inflation in February 2016

Date: 16-03-2016

NBP data: In February, inflation net of food and energy prices stood at -0.1%. In the analysed period, the CPI index amounted to -0.8% (y/y).

On 16 March 2016, Narodowy Bank Polski posted data on core inflation indices in February 2016. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices amounted to -0.9%, as against -1.0% the month before;
  • excluding the most volatile prices amounted to -0.4%, the same as the month before;
  • net of food and energy prices amounted to -0.1%, the same as the month before;
  • the so-called 15-percent trimmed mean (excluding the impact of 15% of the price basket characterized by the lowest and the highest growth rates) stood at -0.5%, compared to -0.6% the previous month.

The core inflation indices remain at a very low level. In January 2015, two of the four indices, i.e. inflation excluding the most volatile prices and the 15-percent trimmed mean, reached record lows. Inflation net of food and energy prices was at the lowest level since June 2006. On the other hand, after reaching a record low in February 2015, inflation excluding administered prices is rising. However, it is still negative and remains at a much lower level than the remaining core inflation indices.

The February CPI index, announced by GUS on 15 March 2016, amounted to -0.8% (y/y). The GUS flash estimate will once more be available beginning with the release of data for March 2016.

Narodowy Bank Polski computes the four core inflation indices on a monthly basis in order to highlight the nature of inflation developments in Poland. The CPI index shows the average price movement across the whole broad basket of consumer goods. By calculating the core inflation indices we can address price changes in various segments of the basket. Thus, sources of inflation can be identified more precisely, and future trends forecasted more accurately. Furthermore, it can be determined to what degree the observed inflation trend is a lasting phenomenon, and to what extent it is driven, for example, by short-lived price hikes triggered by incidental factors.

The core inflation measure most frequently used by analysts is inflation net of food and energy prices. It captures movements in prices which are fairly responsive to the central bank's monetary policy. On the other hand, energy prices (including fuel prices) are not set domestically, but determined in the global markets, sometimes as a result of speculation. Food prices are largely dependent, among other things, on the weather and conditions prevailing in the domestic and global agricultural markets.

See also: The February 2016 core inflation data »

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