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Core inflation in July 2019

Date: 16-08-2019

NBP data: In July 2019, inflation net of food and energy prices stood at 2.2%. The CPI index amounted to 2.9% (y/y) in the analysed period.

On 16 August 2019, Narodowy Bank Polski posted data on July core inflation levels. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices amounted to 3.0%, compared to 2.8% a month before;
  • excluding the most volatile prices amounted to 2.3%, compared to 2.1% a month before;
  • net of food and energy prices amounted to 2.2%, compared to 1.9% a month before;
  • the so-called 15% trimmed mean (excluding the impact of 15% of the price basket characterised by the highest and lowest price growth) was running at 2.2%, compared to 2.1% month before.

In July 2019, CPI inflation grew to 2.9% y/y (from 2.6% in June 2019). The growth in CPI inflation in July 2019 was mainly driven by a further rise in the prices of food and non-alcoholic beverages (vegetables and fruit, above all). The decrease in the growth of fuel prices had the opposite effect.

The growth in the CPI was accompanied by an increase in all core inflation measures. Inflation net of food and energy prices rose to 2.2% y/y (from 1.9% in June 2019). Its rise in July 2019 was driven by both the growth in the prices of services (mainly housing services, telecommunication services and catering services) and the growth in the prices of non-foodstuffs (mainly medical and pharmaceutical products, and motor vehicles).

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 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 also help to determine to what degree the observed inflation trend is a lasting phenomenon, and to what extent it is driven by e.g. short-lived price changes triggered by unforeseeable factors.

The core inflation measure most frequently used by analysts is inflation net of food and energy prices. It captures trends in those prices of goods and services 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 markets.

See also: Core inflation data »

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