Credit: Statec

Inflation is predicted to reach 1.3% this year and 1.7% in 2019, according to Statec.

Statec has revised its inflation forecasts, predicting a slightly lower rate for coming years. Most of this adjustment has come from the latest data, which suggests that underlying inflation may be weaker.

However, a further rise in petroleum product prices partly offsets this effect and inflation may rise from 1.3% in 2018 to 1.7% in 2019. The next index segment is still scheduled for the 3rd quarter of 2018.

Cumulative inflation since the last index segment (ie the half-yearly average) is coming closer and closer to the 2.5% threshold at which a new segment will be triggered. It had risen sharply in the first three quarters of 2017 before the sharp drop in prices for creches limited its progress. From next month on, the threshold, wages, salaries and pensions will be adjusted by +2.5%.

Moreover, despite the recovery of oil prices, inflation forecasts are revised down by 0.1 percentage point for 2018 and 2019 respectively. This is due to recent developments in underlying inflation (which excludes mainly petroleum product prices) which is less dynamic than expected. The favourable cyclical situation and the rise in commodity prices should, however, continue to support and contribute its gradual rise. Core inflation is expected to accelerate from 1.0% in 2018 (down from 1.2% in February forecast) to 1.8% in 2019 (from 1.9%).