Inflation retreated to 9.8% in Dec-22
Annual CPI inflation retreated to 9.8% in Dec-22 from a 10.4% inflation in previous month. Core inflation (non-food, non-energy, and non-tobacco) reduced to 6.8% (-0.4ppts m/m) in December. By categories, annual inflation was mostly driven by price changes in food and non-alcoholic beverages (+16.3% y/y, 5.41ppts), housing, water, electricity, gas and other fuels (+15.8% y/y, 1.58ppts), transport (+5.5% y/y, 0.64ppts), alcoholic beverages and tobacco (+9.3% y/y, 0.62ppts), restaurants and hotels (+14.8% y/y, 0.60ppts), furnishings, household equipment and maintenance (+8.8% y/y, 0.45ppts) and healthcare (-3.6% y/y, -0.36ppts) categories. On a monthly basis, there was a 0.3% deflation in Dec-22, driven by price decrease in transport (-2.7% m/m, -0.31ppts) category.
We forecast average annual inflation at 5.2% in 2023. Notably, we expect annual inflation to approach its 3.0% target by the end-2023. Along with decelerating inflation, we expect the monetary policy rate cut to 9.0% by end-2023 from the current level of 11.0%.
International reserves at record high US$ 4.9bn in Dec-22
Gross international reserves increased by 14.7% y/y to a record high US$ 4.9bn in Dec-22, according to NBG. On a monthly basis, the reserves were up by 5.7% (+US$ 263.9mn). Changes in reserves were attributed to the government and banking sector FX operations, likely also to NBG’s FX purchases (information will be available on 25 January).
