Monthly Inflation Review March 2018

In March 2018, headline inflation continued to decelerate showing deflationary trend of -1.0 percent on a month-on-month (MoM) basis for the second month in a row. In view of this, the March’s year-on-year (YoY) inflation figure sharply declined to 2.5 percent down from 5.2 percent in February 2018.

A detected change in consumer prices occurred mainly due to a drop in food prices (-2.0% MoM and 1.1% YoY). At the same time, prices for nonfood products (0.1% MoM and 4.0% YoY) and services (0.4% MoM and 5.0% YoY) changed moderately.

In general, the current trend of inflation was in line with expectations. However, the pace of deceleration and its rate was lower than expected, well below the forecast and the medium-term target owing to a fall in primary needs products prices.

According to analysis, main impacting factors behind a decrease in annual inflation given firstly the higher base effect were connected mainly to following factors. Positive supply side factors, in particular output and supply of agricultural products under the moderate consumer demand condition, as well as recently amended legislation[1], which eventually brought food markets prices to a balance. Further positive external price environment, such as low inflation in the main trading partners’ countries, including in the region, and stable situation in the world commodity markets for agricultural products helped to minimize inflationary pressures.

In turn the domestic foreign exchange market and national currency’ stability together with prudent monetary policy implementation was conducive to decline in inflationary expectations as well.

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