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Core inflation in March 2016

Date: 12-04-2016

NBP data: In March, inflation net of food and energy prices stood at -0.2%. In the analysed period, the CPI index amounted to -0.9% (y/y).

On 12 April 2016, Narodowy Bank Polski posted data on core inflation indices in March 2016. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices amounted to -1.0%, as against -0.9% the month before;
  • excluding the most volatile prices amounted to -0.3%, as against -0.4% the month before;
  • net of food and energy prices amounted to -0.2%, as against -0.1% 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%, the same as in February 2016.

The core inflation indicators remain very low, in most cases hovering around their historic lows.

The March CPI index, announced by GUS on 11 April 2016, amounted to -0.9% (y/y), as against -0.8% the previous month. The readings of the index were in line with the flash estimates posted by GUS on 31 March 2016. Sharper price declines were mainly due to the fall in the annual growth of fuel prices (to -13.4% y/y in March 2016 – a negative base effect due to significantly weaker growth in global oil prices than in March 2015) and the fall in the prices of services in recreation and culture – to -2.6% y/y in March 2016.

The weakening of the decline in the CPI index was caused by the increase in annual growth of food prices and the prices of non-alcoholic beverages – to 0.8% y/y in March 2016, which was mainly a result of the rise in the prices of unprocessed food (fruit, vegetables and fish).

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 March 2016 core inflation data »

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