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Core inflation in August 2019

Date: 16-09-2019

NBP data: In August 2019, inflation net of food and energy prices amounted to 2.2%, while the Consumer Price Index (CPI) stood at 2.9% (y/y).

On 16 September 2019, Narodowy Bank Polski posted data on core inflation indices in August 2019. In year-on-year terms, inflation:

  • excluding administered (state-controlled) prices stood at 3.0%, the same as the month before;
  • excluding the most volatile prices amounted to 2.3%, the same as the month before;
  • inflation net of food and energy prices amounted to 2.2%, the same 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) stood at 2.0%, compared to 2.2% the month before.

In August 2019, CPI inflation stood at 2.9% y/y, remaining at the same level as in July 2019. On the one hand, the stabilisation of CPI inflation in August 2019 was driven by a further growth in the prices of food and non-alcoholic beverages to 7.2% (as compared to a 6.8% growth in July 2019; mostly growth in the prices of fruit and vegetables). On the other hand, August 2019 saw a further decrease in the prices of energy to -1.1% y/y (as compared to a -0.4% decrease in July 2019; the decrease in the prices of fuel and the base effect in the group of energy carriers).

The stabilisation of the CPI index was accompanied by the stabilisation of three core inflation measures and a decrease in one of the measures (15% trimmed mean). Inflation excluding food and energy prices in August 2019 was running at 2.2% y/y and remained at the same level as in July 2019. The stabilisation of the measure was driven by a further increase in the movement in the prices of services (mainly housing services and transport services), along with a fall in the prices of non-food commodities (including motor vehicles, goods related to leisure and culture).

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 incidental 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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