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Consumer inflation expectations in June 2016

Date: 30-06-2016

NBP data: Consumers surveyed by the Central Statistical Office of Poland (GUS) in the first half of June expect prices to rise only slightly over the next 12 months.

Narodowy Bank Polski released monthly data on consumer inflation expectations on 30 June 2016. The expectations index, i.e. the difference between the percentage of respondents who expect prices to rise faster than at present and the percentage of respondents who expect prices to rise at a slower rate than at present, remain unchanged or fall, amounted to -36 percentage points (as compared with -39 percentage points a month before). The index was on an upward trend from mid-May 2015, yet this uptrend reversed in early 2016.

Quantification of the data obtained in the GUS survey in the first half of June 2016 shows that the average consumer price index as expected by the respondents over the next 12 months is still close to zero (0.20% compared to 0.19% a month earlier). The expectations quantification procedure, which translates the respondents’ subjective perceptions into the language of official inflation statistics, assumes that the price change in the preceding 12 months, perceived by the respondents equals the CPI available at the time of the survey. In June, the figure was negative at -1.1 percent. Such a result poses some difficulty for the interpretation of the survey results as – in line with the design of the survey question – the respondents who expect prices to go up are to specify whether price growth will be faster, similar or weaker than presently observed. Therefore, the June quantification procedure used the last registered positive rate of current inflation (i.e. 0.3 percent in August 2014) to represent the perceived current inflation instead of the negative rate of inflation available at the time of the survey. The technical nature of this operation renders the objectified estimate of inflation expectations more tentative, and the quantification results should be treated as an approximation.

As of July 2016, Narodowy Bank Polski changes the way inflation expectations of consumers are presented by discontinuing the publication of the quantified measure of these expectations. This is because the use of the quantification method in the period of deflation poses problems which were highlighted in previous NBP releases; the other reason is the intention to present the data that are unaffected by the specific assumptions of quantification methods. Data on consumers’ inflation expectations in the form of balance sheet statistics will be presented in Section “Inflation expectations and forecasts”. In addition, survey data on inflation expectations of businesses and professional forecasters will be published (inflation expectations of professional forecasters will be published as a link to the site of “NBP Survey of Professional Forecasters” where the data are released on a regular basis).

Narodowy Bank Polski examines, on a regular basis, inflation expectations of not only consumers, but also the business community, financial analysts and professional forecasters. The expectations provide one of the inputs to the monetary policy decision-making process.

See also: Consumer inflation expectations in June 2016

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