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Core inflation in October 2016

Date: 15-11-2016

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

On 15 November, Narodowy Bank Polski posted data on October 2016 core inflation indices. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices stood at -0.1%, as compared with -0.6% in the previous month;
  • excluding the most volatile prices amounted to 0.2%, compared to 0.0% in the previous month;
  • net of food and energy prices amounted to -0.2%, as compared to -0.4% the month before;
  • the so-called trimmed mean (excluding the impact of 15% of the price basket characterised by the highest and lowest growth rates) was running at 0.3%, compared to -0.1% the month before.

Throughout 2016, core inflation indices have been running very low, yet most of them have embarked on an upward trend in the last few months. In October 2016, following a rise in the CPI index, all the core inflation measures published by NBP increased as well.

The October 2016 CPI index, announced by GUS on 14 November, stood at -0.2% (y/y) . This reading was in line with the flash GUS estimate of 31 October 2016. Faster CPI growth was primarily supported, like the month before, by the further rise in energy prices (to -0.9% y/y in October 2016). This resulted from the increase in the prices of fuel used for private means of transport. To a smaller extent, growth in the prices of non-food products and services also picked up (to -1.3% and 0.9%, respectively). The prices of food and non-alcoholic beverages rose at the same rate as the month before, i.e. at 0.4% y/y.

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 only shows average price movement across the whole broad basket of consumer goods. By calculating 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 forecast 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 by e.g. short-lived price hikes triggered by incidental factors.

The core inflation measure most frequently used by analysts is inflation excluding 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. Also food prices are largely dependent on, among other things, the weather and conditions prevailing in the domestic and worldwide agricultural market.

See also: The October 2016 core inflation data »

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