The Bank’s estimate of the pass-through coefficient from the exchange rate to consumer prices is around 0,2 i.e a 10 per cent depreciation results in a 2 percentage point increase in the inflation rate. However, this happens with a lag, and is dependent on perceptions of how permanent the move is and the state of the business cycle.
To date, the pass-through from the exchange rate to inflation has been relatively constrained, particularly compared to previous periods of high volatility and currency weakness. This is probably due to low growth and relative lack of pricing power in a number of sectors of the economy.