Inflation set to slow down, bank predicts

Inflation will slow down this month, according to Alpha Bank’s research department. The bank’s weekly bulletin predicted yesterday that the annual pace of consumer inflation will drop slightly to 3.6 percent at the end of August from 3.8 percent at end-July. It also forecast that inflation will average 3.4 percent in 2006, compared to 3.5 percent in 2005, on two conditions: that the price of oil does not exceed $72 per barrel and that the euro does not fall below $1.20. These estimates parallel closely those made a few days ago by Manolis Kontopyrakis, general secretary of the National Statistics Agency (NSS), who also made them conditional on the price of oil. The Harmonized Index of Consumer Prices (HICP), the inflation measure used by the European Central Bank, shot up to 3.9 percent in July and has averaged 3.36 percent in the first seven months, down from 3.41 percent during the same period last year. NSS experts have been perplexed by the fact that demand for gasoline has not declined despite the sharp rise in prices. They suspect that there is also money laundering involved in the sector, besides illegal trading. The Economy and Development ministries are trying to keep prices low by increasing inspections. The price of oil affects several sectors, not least rents, which shot up 7 percent in July and contributed to the rising inflation. Another cause of concern is that Greece’s inflation remains about double the eurozone average, undermining competitiveness and costing jobs.

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