Annual inflation drops to 3.5% in February
Annual inflation eased to 3.5% in February down from 4% in January. Month on month consumer prices dropped by 0.2%. Inflation is largely following the path of our forecasts. Annual growth of service prices decelerated to 5.1%, while prices of goods slowed to 2.9%.
Alcohol and electricity and fuel remain the main drivers of annual inflation, contributing 1pp and 0.8pp, respectively. The main reason behind easing inflation was slower growth of food prices. Food inflation eased to 1.9% annually down from 3.4% a month ago – for example, vegetables were 10.7% cheaper than a year ago. In addition, falling prices of communication contributed negatively to annual inflation.
Inflation will ease this year
We expect inflation to keep moderating this year. We project average annual inflation to be at 3.3% in 2018. Next month we will see the effect of excise taxes dissipate, which should result in further slowdown of consumer price growth. Strengthening euro might put a downward pressure on the prices of imports. However labour market pressures and thus rapid wage growth will keep growth in the prices of services elevated.
For more information about this report, please contact Mr. Vytenis Šimkus, +370 5 258 5163, firstname.lastname@example.org
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