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Inflation accelerates to 2.2% in June

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13 years ago
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For the first half of this year, inflation rate is estimated to have increased by an average of 1.5 percent

TIRANA, July 9 – Poor consumer demand and domestic consumption has kept inflation rate considerably below the central bank’s target of 3 percent this year. INSTAT data show the inflation rate slightly accelerated to 2.2 percent in June 2012, registering the highest rate for this year. A year ago, inflation rate in June was at 3.9 percent, only 0.1 percent below the central bank’s upper target.
For the first half of this year, inflation rate is estimated to have increased by an average of 1.5 percent. Lower import prices and domestic agricultural production in the past few months have had a positive impact. INSTAT reports “food and non-alcoholic beverages” prices dropped by 1.8 percent compared to last May. Within this group “vegetable and potato prices” were down 12.2 percent.
Year-on-year INSTAT data show drinking water prices registered the highest 21.8 percent increase in June 2012, followed by fruit prices at 8.9 percent and “milk, cheese and eggs” at 4.1 percent. Food and non-alcoholic beverages, the main contributor to the Consumer Price Index, rose by 2.7 percent in June 2012.
Garment and footwear prices dropped by 2.3 percent.
Medicine prices, which since early 2011 are being imposed a 10 percent VAT, are reported to have undergone a 3.6 percent increase year-on-year.
INSTAT reports fuel prices underwent a slight decrease of around 2.45 percent compared to April 2012.
At an unusual record low for the beginning of the year, and failing to stimulate consumer demand, experts warned earlier this year the Albanian economy was heading to deflation risks. Albania’s central bank itself estimates that by preserving the inflation rate around the 3 percent rate, the monetary policy will continue having positive contribution to the development of the Albanian economy. “This targeted inflation rate and the monetary policy applied for its achievement, positively affects the stability of economic growth rates, as has been proved in recent years. In reality, the target of preserving an unchanged price level, i.e an inflation rate close to zero could correspond to a deflationary situation,” says the Bank of Albania in its 2012-2014 monetary policy document.
Low inflation pressures, on a downward trend since the second half of 2011, have allowed the Bank of Albania to cut the key interest rate by 1 percentage point to a historical record low of 4.25 percent since Sept. 2011 in an effort to stimulate the economy but the moves have been hardly reflected in lower loan interest rates and an increase investments.
The disinflationary trend which started in the second half of 2011 continued in the first quarter of 2012. Inflation fell to a low of 0.6% in February driven mainly by a drop in the food index – which accounts for a substantial weight in the CPI. This partly reflects lower imported food prices from Greece – a major source of food imports in Albania – as Greek producers by-passed the middlemen to sell directly to consumers at lower prices. Inflation averaged 1.1% in the first quarter, significantly below the lower bound of the Bank of Albania’s (BoA) target range of 2-4%. In April and May, inflation picked up somewhat to 1.6% and 1.9%, respectively.

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