Price developments in the first-four months of 2017 were broadly in line with the Bank’s earlier forecasts which indicated that inflation would continue to trend downwards over the period. The May 2017 forecast by the Bank remained unchanged from the March forecast and inflation is still expected to gradually decline and reach the target band by 2018, barring any unanticipated shocks.
The disinflation process is expected to be supported by monetary policy tightness, stability in the local currency and gradual improvement in the macroeconomic fundamentals. Although risks are broadly subdued, unanticipated shocks through administrative price adjustments may threaten the inflation outlook and require some policy actions.
At the MPC meetings which ended on May 22, 2017, the latest data showed that inflation picked up slightly in April, after six consecutive months of decline, reflecting the recent upward adjustment in transport costs. The continued downward trend in inflation is supported by the tight monetary policy stance, stability in the exchange rate and some base effects.
