Headline CPI inflation accelerated to 6.0% y/y in July from 5.7% y/y in June, according to new figures published by Belstat. The acceleration was primarily due to food prices where inflation climbed to 6.7% y/y from 6.1% y/y in June on the back of a low base last year when the seasonal decline of fruit and vegetable prices was very strong. Services prices also contributed to higher inflation because of the different timing of utility price hikes. Last year the hike was in September, while this year it was in July. In contrast, non-food goods price inflation slowed down further to 4.1% y/y from 4.2% y/y in June and 4.3% y/y in May. This supports the central bank’s view that underlying inflation is decelerating and the latest increase in headline rates is due to one-off factors. Earlier this week the central bank cut its main policy rate by 50bps to 9.5%, based on the observation that inflation fell below the 5% target in Q2 (in sequential seasonally adjusted terms), although the headline rate was 5.8% y/y. The statement also correctly predicted that inflation may rise in July on one-off factors. The CB expects that inflation will slow down in the remaining months of 2019 and will be close to the 5% target at the end of 2019.