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Core inflation in November 2018.

Date: 17-12-2018

NBP data: In November 2018, inflation net of food and energy prices amounted to 0.7%. The CPI index in that month stood at 1.3% (y/y).

On 17 December 2018, Narodowy Bank Polski posted data on core inflation indices in November 2018. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices stood at 1.2%, as compared with 1.8% in the previous month;
  • excluding the most volatile prices amounted to 1.4%, the same level as in the previous month;
  • net of food and energy prices amounted to 0.7%, as compared with 0.9% the month before;
  • the so-called 15% trimmed mean (excluding the impact of the price basket characterised by the highest and the lowest growth rates) stood at 1.5%, against 1.7% the month before.

The decrease in inflation was driven by a significant drop in the prices of food and non-alcoholic beverages (from 1.8% y/y to 0.7% in November 2018, mainly as a result of the base effect in the meat, milk, cheese and eggs group, as well as lower fruit prices). To a lesser degree the drop in inflation was driven by lower growth of energy prices (from 5,0% y/y to 4.2% y/y in November 2018, a negative base effect linked to much stronger growth of fuel prices in November 2017). The growth of services prices went down from 1.5% y/y in October 2018 to 0.9% y/y in November 2018, mostly as a result of reductions in the prices of telecommunications services (special offers on the mobile telecoms market) and services related to recreation and culture (promotion campaigns for digital and cable TV services).

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 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, for example, 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 on, among other things, the weather and conditions prevailing in the domestic and global agricultural market.

See also: Core inflation data »

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