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Core inflation in July 2017

Date: 14-08-2017

NBP data: In July inflation net of food and energy prices amounted to 0.8% y/y. In the analysed period, the CPI index stood at 1.7% (y/y).

On 14 August, Narodowy Bank Polski posted data on July 2017 core inflation levels. In year-on year terms, inflation:

  • excluding administered (state-controlled) prices stood at 1.7%, as compared with 1.5% in the previous month;
  • excluding the most volatile prices amounted to 1.3%, the same level as the month before;;
  • net of food and energy prices amounted to 0.8%, the same level as 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) stood at 1.5%, compared to 1.3% in the previous month.

The inflation growth in July 2017 was accompanied by an increase in two of the core inflation measures (inflation excluding administered prices and the so-called trimmed mean), while the other two core inflation measures remained at the level of the previous month. The inflation growth was mainly caused by an increase in food prices and non-alcoholic beverages by 0.7 pp. (to 4.4% y/y in July 2017), above all, as a result of the weaker seasonal decline in the prices of vegetables and the stronger growth in the price of butter due to low supply amid strong domestic and foreign demand.

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: Core inflation data »

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