The annual inflation rate fell to 2.4 percent in March reaching a new historic low from 2.59 percent in February, according to data released today by the National Statistics Institute (INS).

The monthly average inflation rate was 0.5 percent in Q1 2012 against 0.7 percent in Q1 2011.

“The slashed inflation rate opens the way for further easing of the monetary policy, although the annual inflation rate was above the central bank’s forecast of 1.9 percent y/y in Q1,” says Melania Hancila, head of research & strategy department at Volksbank. “In the next quarter we estimate the inflation rate to stay between 2 and 2.5 percent, depending on the foreign exchange rate and fuel prices,” she adds.

Hancila says the annual inflation rate will rise starting July, reaching 3.5 percent at the end of 2012, in line with the central bank’s target.

In March, food prices went up by 0.64 percent while non-food prices rose by 0.32 percent. Service tariffs grew by 0.20 percent. Overall prices were up 0.42 in March against February.

Prices grew on average by 4.5 percent in the last 12 months (April 2011 – March 2012) against the previous 12 months (April 2010 – March 2011), according to the Consumer Price Index.

The Volksbank economist says the inflationary pressure in Q1 was caused by increased fuel prices, higher excises and administered prices, and the increase in volatile prices due to seasonal prices in food products.

Business Review