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Core inflation in June 2020

Date: 16-07-2020

NBP data: In June 2020, inflation net of food and energy prices amounted to 4.1%. In the period under analysis, the Consumer Price Index (CPI) stood at 3.3% (y/y).

On 16 July 2020, Narodowy Bank Polski published data on core inflation indices in June 2020. In year-on-year terms, inflation,:

  • net of administered (state-controlled) prices, amounted to 2.3%, compared to 1.9% a month earlier;
  • net of the most volatile prices, amounted to 3.5%, compared to 3.4% a month earlier;
  • net of food and energy prices, amounted to 4.1%, compared to 3.8% a month earlier;
  • the so-called 15 trimmed mean, excluding the impact of 15% of the price basket characterised by the lowest and highest growth rates, amounted to 3.5%, compared to 3.4% a month earlier.

In June 2020, the CPI inflation rose to 3.3% y/y (by 0.4 percentage points from May 2020). The rise in the CPI was driven by faster energy price growth (by 1.5 percentage points, to -3.8% y/y), mainly as a result of an increase in fuel prices on the back of rising oil prices in global markets (from -23.4% y/y in May to -19.3% y/y in June 2020). The growth of non-food prices (including excise goods) was also higher by 0.4 percentage points, reaching 1.4% y/y (the effect of a weaker decline in the prices of apparel and footwear than what would result from the seasonal pattern and a price increase in the groups of furnishing and goods related to recreation and arts). The growth in the prices of services also picked up (by 0.3 percentage points, to 7.4% y/y), which was primarily due to a rise in the prices of package tourism services (of 7.1% m/m, with the share of estimated data in this group exceeding 50% in June 2020) and communications (of 1.7% m/m; mainly as a result of higher prices of telecommunications services packages). On the other hand, growth in the prices of food and non-alcoholic beverages fell (to 5.7% y/y in June 2020 from 6.2% in May, following a decline in the prices of vegetables).

Narodowy Bank Polski computes the four core inflation indices on a monthly basis to highlight the nature of inflation developments in Poland. The CPI shows average price movements across the whole broad basket of consumer goods. When calculating core inflation indices, price changes in various segments of the basket are analysed. This helps to better identify the sources of inflation and forecast future trends more accurately. This also helps to find to what degree inflation is permanent and to what extent it is determined, e.g., by price changes of a short duration triggered by unpredictable factors.

The core inflation measure most frequently used by analysts in inflation targeting is inflation net of food and energy prices. It captures trends in the prices of those 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 market.

See also: Core inflation data »

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Lombard rate 7.25
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Discount rate 6.85

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