Inflation at 2.5% y/y and 0.3% m/m in April 2015
Annual inflation was recorded at 2.5% in April 2015, according to GeoStat. Overall price changes were driven by price increases on food and non-alcoholic beverages (+2.7% y/y, +0.84ppts), health (+6.4% y/y, 0.65ppts), and alcoholic beverages and tobacco (+11.0% y/y, +0.56ppts), while prices in the transport group decreased by 5.1% y/y (-0.60pppts).
The monthly inflation rate was 0.3% in April 2015. Price increases on transport (+1.8% m/m, +0.20ppts), alcoholic beverages and tobacco (+1.0% m/m, +0.06ppts), and health (+0.5% m/m, +0.05ppts) were the major drivers of monthly inflation dynamics.
NBG increases policy rate by 50 basis points to 5.0%
At its meeting on May 6, 2015, NBG’s monetary policy committee increased the policy rate by 50 basis points to 5.0% and projected a further gradual rate increase to 5.5% by the end of the year. Inflation was well below the target in April, but NBG expects it to rise gradually toward the 5.0% target by end-2015. The decision to raise the policy rate signals the central bank’s commitment to price stability in a flexible exchange rate environment with increased inflation expectations. NBG also mentioned that the weaker lari has already started to affect import demand, which facilitates the adjustment of external imbalance and fosters domestic demand.
Gross international reserves stood at US$ 2.4bn end-April 2015
Gross international reserves stood at US$ 2.4bn (-0.9% m/m) and net foreign assets of NBG stood at US$ 2.2bn (-1.0% m/m) as of end-April 2015, according to NBG. The decrease in reserves resulted from interventions on the FX market, as NBG sold US$ 40mn (1.6% of total) in April. However, reserves shrank by just US$ 22mn, reflecting effects of revaluation and/or government FX operations.
