1. 1 1 Measuring Core Inflation in SN 1. Inflation versus Core Inflation 2. Monetary policy – operational target 3. Decide and Implement 4. Comparisons

2. 2 Inflation vs Core Inflation Short term – strong fluctuations Long term – different price trends

3. 3 Operational Target The operational target of monetary policy shall be annual consumer price inflation of approximately 2.5 per cent over time. In general, the direct effects on consumer prices resulting from changes in –interest rates, –taxes, –excise duties and –extraordinary, temporary disturbances shall not be taken into account.

4. 4 Extraordinary temporary disturbances? COICOPStdevCOICOPStdev Telephone equipments (1)11.18Paramedical services (8)3.50 Heat energy (2)6.44Shoes (6)2.88 Electricity (10)5.10Fruit (7)2.76 Vegetables (3)3.90Postal services2.64 Garments (4)3.88Fuels and lubricants… (13)2.53 Liquid fuels (5)3.81Passenger transport by air (24)2.49

5. 5 Taxes and Duties Taxes - adjusted in CPI-AT Value added taxTax on Mineral products Tax on Spirit, wine and beerTax on Chocolate and sweets Tax on TobaccoTax on Non-alcoholic drinks Tax on SugarTax on Petrol Tax on Air TravelTax on Autodiesel fuel Tax on TapesTax on Marine motors Tax on Radio and television materialsConsumer tax on electricity Tax on motor vehicles (from 2005)

6. 6 Taxes and Duties CPI CPI-AT

7. 7 Energy goods in CPI Energy goods not so dominant, but … 2011 Electricity, gas and other fuels4.01 % Fuels, lubricants, personal transport equipment2.27 % Misc. energy products1.12 % Total weights of energy products7.4 %

8. 8 Energy goods in CPI Energy goods not so dominant, but … –Short term – strongly fluctuating 12-month change

9. 9 Energy goods in CPI Energy goods not so dominant, but … –Long term – higher price trend Index (1998=100)

10. 10 CPI adjusted for tax changes and excluding energy products

11. 11 Comparison with other measures of core inflation

12. 12 Questions or comments?