CPI inflation slowed down to 1.2% y/y in February, down from 1.5% y/y in January, according to figures of the statistical office, published on Wednesday. The deceleration was largely broad-based. The price growth of both food and alcoholic beverages and tobacco decelerated, with the former likely attributed to international food prices during the month. In addition, utility prices also contributed, while the prices of household items such as furniture and equipment exerted downward pressure on the headline index, as they fell by 0.2% y/y. Meanwhile, transport prices picked edged up slightly to 0.2% y/y, despite moderating oil prices at international markets. As reported yesterday, petrol prices have dropped to their lowest level in four months.
Looking forward, CPI inflation might pick up again in the near term, given that oil prices at international markets have started to recover at end-February. In addition, consumer confidence and domestic demand remains rather strong, meaning this might exert upward pressure on price growth. Note that average annual CPI inflation is projected between 1.5-2.0% in 2018.