BSH: Domestic inflation remains dominant in the overall increase in prices

2024-08-15 15:36:00, Ekonomi CNA

Internal inflationary pressures are slowing down, but still they continue to be dominant in the formation of total inflation.

The Monetary Policy Report of the Bank of Albania points out that the contribution of the domestic economy was predominant in the total rate of inflation for the second quarter as well. Of the 2.1% that was average inflation, 1.9% was the contribution of internal inflation.

According to the Bank of Albania, internal inflationary pressures maintained their stability, reflecting the increase in demand for goods and services and unit labor costs.

Meanwhile, the imported component of inflation further reduced its contribution to the formation of total inflation in the second quarter of the year.

The report concludes that the Albanian economy is characterized by the continuation of the positive progress of economic activity in the first half of the year, while the fall in inflation accelerated in the second quarter of the year. Inflation fell to an average level of 2.1%, from 2.7% in the first quarter.

As in the beginning of the year, its decline was dictated by the fall in inflation of food items, which reflected the similar performance of these prices in regional markets.

However, although it was dominated by this category, the fall in inflation in the second quarter was observed on a broader price base, among them the prices of some services.

Overall inflationary pressures have been reduced, helped by falling inflation in trading partners, exchange rate appreciation and the normalization of monetary policy stance over the past two years.

The slowdown in inflation during the second quarter of 2024 was broad-based, but the sharpest decline was experienced by the short-term and imported components of inflation.

Short-term and foreign-origin components of inflation slowed significantly, hovering around historic lows. Non-core inflation and imported inflation reached 1.7% and 1.3%, respectively, in the second quarter, decreasing by 0.8 and 1 percentage point from the corresponding values ??of the previous quarter.

The decrease in food inflation in the foreign and domestic markets, as well as the effects of the appreciation of the local currency, were reflected in the slowdown of the inflation of these components. Core and internal inflation also decreased, but maintaining the dominant role in the formation of total inflation.

Core inflation, net core inflation and domestic inflation marked respectively the values ??of 2.3%, 2.7% and 2.3% in this quarter, decreasing by almost the same step (0.5 percentage points), from the respective values ??of the previous quarter.

Although declining, the most stable components of inflation remained at higher values ??than the total inflation of the quarter. In addition, net core inflation continued to remain slightly above the average of the last three years, reflecting the stronger persistence of inflation in services and other durable goods./Monitor