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Core inflation in February 2020

Date: 16-03-2020

NBP data: In February 2020, inflation net of food and energy prices stood at 3.6%. The CPI index stood at 4.7% (y/y) in the analysed period.

On 16 March 2020, Narodowy Bank Polski posted data on core inflation indices in January and February 2020. In year-on-year terms, inflation in February 2020:

  • excluding administered (state-controlled) prices stood at 4.0%, compared to 3.8% in the previous month;
  • excluding the most volatile prices amounted to 3.4%, compared to 3.1% in the previous month;
  • inflation net of food and energy prices amounted to 3.6%, compared to 3.1% 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 3.5%, compared to 3.3% the month before.

In February 2020, CPI inflation picked up to 4.7% y/y (from 4.3% y/y in January). The largest contributors to CPI growth were the following: a rise in electricity price growth (to 13.2% y/y compared to 9.4% y/y in January as a result of the entry into force of new tariffs for the sale and distribution of electricity), a rise in the prices of excise goods (to 4.1% y/y compared to 2.6% y/y in January as a result of the higher rate of excise tax on ethyl alcohol and tobacco products from January) as well as a further rise in service price growth (to 6.4% y/y compared to 5.9% y/y in January as a result of higher prices of, among others, administered services related to housing as well as gastronomic services).

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, for example, short-lived price changes triggered by incidental factors.

The core inflation measure most frequently used by analysts is inflation excluding food and energy prices. It captures trends in prices of 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. Also food prices are largely dependent on, among other things, the weather and conditions prevailing in the domestic and worldwide agricultural market.

See also: Core inflation data »

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