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Core inflation in May 2018

Date: 15-06-2018

NBP data: In May 2018, inflation net of food and energy prices amounted to 0.5%, while the Consumer Price Index (CPI) stood at 1.7% (y/y).

On 15 June 2018, Narodowy Bank Polski posted data on core inflation indices in May 2018. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices stood at 1.9%, as compared with 1.7% in the previous month;
  • excluding the most volatile prices amounted to 1.1%, as compared with 1.2% in the previous month;
  • net of food and energy prices stood at 0.5%, as compared with 0.6% in the previous month;
  • the so-called 15-percent trimmed mean (excluding the impact of 15% of the price basket characterised by the highest and lowest growth rates) stood at 1.6%, as compared with 1.5% the month before.

The upward trend in inflation in May was driven by continued growth of the prices of fuel for private means of transport (by 7.8 p.p. to 9.2% y/y, on the back of rising prices of oil in the global market). On the other hand, a decrease in the growth of the prices of food and non-alcoholic beverages (by 1.1 p.p. to 3.0% y/y), mostly driven by the prices of fruit and meat, worked in the opposite direction.

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 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: Core inflation data »

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