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Core inflation in December 2017

Date: 16-01-2018

NBP data: In December 2017 inflation net of food and energy prices amounted to 0.9%. In the analysed period, the CPI index stood at 2.1% (y/y).

On 16 January 2018, Narodowy Bank Polski posted data on December 2017 core inflation levels. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices stood at 2.2%, as compared with 2.7% in the previous month;
  • excluding the most volatile prices amounted to 1.8%, the same level as the month before;
  • net of food and energy prices amounted to 0.9%, the same level as the month before;
  • the so-called 15% trimmed mean (excluding the impact of 15% of the price basket characterised by the highest and lowest growth rates) was running at 1.6%, as compared with 2.0% the month before.

The downward trend in inflation was primarily driven by a decrease in the growth of prices of fuel for private means of transport (to -1.3% y/y in December 2017 as compared to 4.7% y/y in November 2017) and prices of non-food products (to 5.4% y/y in December 2017 as compared to 6.0% y/y in November 2017).

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 global agricultural market.

See also: Core inflation data »

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