The MNB put the average CPI for 2014 at 3.2%. The central bank noted that the forecasts assume an endogenous monetary policy. The MNB put GDP growth at 0.6% in 2013 in the fresh report, up from 0.5% in the March report. It forecast GDP growth of 1.5% in 2014, lowering the projection from 1.7% in March. The projections, together with the Monetary Council’s statement on the report, were published on Tuesday, but the full report will not be released until Thursday.
    According to the Council’s statement, inflation is likely to ease further, mainly because of drops in centrally-regulated prices and commodities prices, while underlying inflation continues to reflect the disinflationary impact of weak domestic demand.
    The inflation rate adjusted for the effect of indirect taxes is expected to remain under 3% over the medium term, but in the longer term, the effects of government measures that increase production costs in some sectors are likely to feed through to the corporate sector, the Council said. However, pass-through to consumer prices is likely to be “gradual and partial”, it added.
    The Council said wage growth was likely to be “historically low” because of companies’ efforts to rebuild profitability, loose labour market conditions and the adjustment of inflation expectations, thus supporting the maintenance of a low inflation environment.