Page 18 - GEORptNov18

4.2 Inflation
4.2.1 CPI dynamics
Georgia’s inflation steady and low: 2.7% y/y in September
Georgia’s consumer prices increased by 2.7% y/y in September, latest statistics office data shows. Headline inflation eased from 3.1% y/y in August, after having remained below 3% y/y during February-July. The data supports expectations for an interest rate cut at the October 24 monetary policy committee meeting.
The steepest advances were seen in the prices of transport (+6.2% y/y), health (+4.7% y/y), alcoholic beverages and tobacco (+4.9% y/y) and housing (+4.4% y/y).
In absolute terms, consumer prices slightly declined through 2018, helped by lower exchange rate and production price pressures. In August, the industrial production price index increased by 6.6% y/y while the 12-month rolling average price decelerated to 8.8% y/y from 9.1% y/y one month earlier. The local currency weakened in September by 3.3% y/y in nominal terms versus the euro - but it remained in line with the past year’s average, maintaining a rather stable trend.
According to central bank estimates expressed on the occasion of the latest monetary policy committee meeting on September 6, there was still a necessity to make a gradual exit from tight monetary policy, although how this process would be carried out depended on the magnitude of external risks. A rate cut at the upcoming monetary meeting is technically possible given the hawkish rate currently in place (7%), but it may not occur given the still significant uncertainties related to global energy prices and internal inflationary pressures.
18 GEORGIA Country Report November 2018 www.intellinews.com