Albania’s consumer prices increased by 1.2% y/y in August 2013, slowing down for the second consecutive month from 1.6% y/y in July, and 2.3% y/y in June, the statistics institute, INSTAT, informed. The growth was also lower than the 2.8% y/y rate recorded in August 2012. In monthly terms, consumer prices edged down by 0.1% in August, following a 0.8% m/m drop in the previous month.

The overall trend was again determined by food prices, which grew 2.8% y/y, easing from 4% y/y in July. The growth was mainly driven by a 14.8% y/y increase in fruit prices and an 8.4% rise in vegetable prices. Costs of the two categories eased from 19.4% y/y and 11.7% y/y in July 2013.

Prices of alcoholic beverages and tobacco increased by 3.9% y/y in August advancing slower than July’s rise of 4.1% y/y. Communications costs grew by 1.3% y/y slightly faster than in the previous month.

Education charges increased by 2.2% on the year. Prices of transport advanced by 0.3% y/y reflecting a 1.4% y/y growth in the costs of transportation vehicles.

On the other hand, lower prices of clothing and footwear (down 3.8% y/y) continued to exert downward pressure on the inflation. Regulated prices registered a 0.5% y/y drop in the month as well.

In our estimates, the average inflation rate was equal to 2.1% in January to August 2013, up from 1.8% in the same period of 2012.

The central bank decided at its latest meeting on August 28 to keep the base interest rate at the historic low of 3.50% after cutting it by 25bps in July. The decision is in line with the objectives to meet the mid-term inflation target, while providing necessary stimulus to support lending growth and consumption.