Deflation in April

In A140513_CPI_ENpril, consumer prices decreased by 0.1% year-on-year. In month-on-month terms, prices rose by 0.1%. Yet, in terms of the Eurostat’s harmonized price index, the annual price index was only -0.2%, whereas the monthly index was -0.1%. Importantly, the core inflation slowed to 2.4% year-on-year, mainly on very low imported price dynamics. In May, further disinflation can take place on the April gas price cut. Hence, it cannot be excluded that the MNB continues on its monetary easing cycle in May. Our 0.8% average inflation forecast for 2014 is likely to be revised downward.