Albania’s consumer prices increased by 1.6% y/y in July 2013, slowing down from a 2.3% annual rise in June, the statistics institute, INSTAT, said on its website. The growth was also lower than the 2.7% y/y rate recorded in July 2012. In monthly terms, consumer prices declined by 0.8% in July, faster than the 0.6% m/m drop in the previous month.

The overall trend was again determined by food prices, which grew 4% y/y, slowing down from 5.4% y/y in June. The growth was mainly driven by a 19.4% y/y increase in prices of fruits and a 11.7% rise in vegetable prices.

Prices of alcoholic beverages and tobacco went up 4.1% y/y in July advancing on the same pace as in June. Communications costs grew by 1.2% y/y slightly slower than in the previous month.

Education charges increased by 2.2% on the year. Prices of transport grew by 0.5% y/y as a result from 1.6% y/y growth in the costs of transportation vehicles.

On the other hand, lower prices of clothing and footwear (down 4.4% 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 2.3% in January to July 2013, up from 1.7% in the same period of 2012.

The central bank decided at its latest meeting on July 31 to cut the base interest rate by 0.25pps to a historic low of 3.50% after keeping it unchanged since the start of the year. 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.