INSTAT: Inflation rate drops to record low for 2011

TIRANA, Sept. 6 – The annual inflation rate dropped to a record low of 3.1 percent in August 2011, the lowest rate registered during this year, remaining within the central bank’s 3ѱ percent target band for the third month in a row. Compared to July 2011, the Consumer Price Index was up 0.3 percent. One year ago, the CPI was up 3.5 percent, said INSTAT in its monthly report. Lower domestic production increased vegetable and potato prices by 4.8 percent compared to the previous month. Fruit prices dropped by 1,4 percent. Prices in the “garment and footwear” group dropped by 1.2 percent while diesel and petrol prices continued their growing trend with prices up 0.1 percent and 0.2 percent respectively. Inflation remained above the 4 percent from February to May 2011 exceeding the Bank of Albania’s target by up to 0.5 percent. The highest level was registered last February when the Consumer Price Index rose 4.5 percent year-on-year. The Bank of Albania says the inflation rate will return to normal rates by the end of this year. Central bank governor Ardian Fullani said in a recent press conference that the inflation rate is expected to get back to the central bank’s 3ѱ target band by year-end explaining that “the effect of the shocks of foreign prices will wane while the effect of administered prices will cease in the third quarter.” Tobacco, cooking oil, bread and grain prices registered the highest year-on-year increases during the first eight months of this year. Latest INSTAT data show tobacco prices were up 18.3 percent year-on-year in July 2011, bread and grain prices grew by 12.1 percent while cooking oil and fat prices rose by 10.4 percent. The increase in tobacco prices was a result of higher excise tax imposed starting from January of this year, when the excise tax for a cigarette pack rose by 20 lek to 70 lek. However, what’s most concerning is the sharp increase in basic products such as bread, cooking oil and sugar– which mostly affect Albania’s poorer population. Sugar prices registered a 10 percent increase in August 2011. BoA to lower key interest rate Central bank governor Ardian Fullani has hinted the Bank of Albania’s supervisory council could lower the key interest rate for lek in the short term if the inflation rate’s downward trend continues. The move could lower interest rates for loans in the national currency, lek, which has been losing considerable ground against the Euro during the past two years. “In the short-term future, the inflation’s falling trend and falling balance of risks could create the grounds for a review of the monetary policy,” said Fullani. Last week, the Bank of Albania decided to keep the key interest rate unchanged at 5.25 as inflation pressure are lowering. Inflation rate last July was 3.6 percent, remaining within the central bank’s 3ѱ percent target. Inflation rate during the first half of this year has been at 4.05 percent, exceeding the central bank’s target by 0.5 percent mainly because of higher food prices in international markets and the increase in some excises taxes. Last March, BoA raised the repo rate by 0.25 percentage points to 5.25 percent after keeping it unchanged at 5 percent, one of the lowest historical levels, for eight months. Governor Ardian Fullani said the move was aimed at keeping inflation rate in check following a sharp rise in consumer prices last February.