CPI inflation remained at 1.3% y/y in November, similarly to its level in the previous month, the stats office (Instat) reported. Accelerating food inflation was offset by a deepening y/y drop in the fuel prices during the month. Overall, the headline print will remain subdued in the short- and mid-run by the falling inflation in Albania’s main trading partners, in our view. A recent comment by the Bank of Albania (BoA) governor Gent Sejko mentioned however that the domestic inflationary pressures have started to build-up and the expected increases in both wages and production costs in the future, along stabilization of the exchange rate, should create the necessary conditions for the inflation to gradually move to its 3.0% target in H2/2021. BoA will continue with its current accommodating monetary policy to support GDP and inflation growth at least until mid-2020, but it noted that it could ease the policy even further if necessary. On monthly basis, the CPI inflation dropped by 0.2% m/m, compared to 0.1% m/m increase in September.
Food inflation picked up to 3.0% y/y in October, on the back of strengthening prices of meat, fish, milk, cheese and eggs, fruits, vegetables and sweets. Still, we think that food price growth will remain curbed in the next months due to the easing food prices in Albania’s main trading partners. Transport prices deepened their y/y decline to 2.0% y/y in October, which reflected the renewed downward trend in global oil prices, in our view.