Since the beginning of the year inflation has been moving around the target rate (3 percent). In March headline inflation was 3.7 percent with a significant contribution from one-off factors. Particularly, the increase in excise taxes on tobacco products at the beginning of the year contributed 1.3 percentage points to annual inflation in March. According to the current forecast, other things equal, the inflation  will move towards the target level once the one-off (exogeneous) factors have faded away. It is important to note that the monetary policy is an instrument of influencing domestic demand and, generally, central banks do not react to exogeneous factors (i.e. those independent from monetary policy).

Along with external risks softening, in the first quarter of 2019 the NBG continued the process of gradual exit from moderatelly tightened monetary policy (normalization process). Despite the fact that aggregate demand remains below the potential level of output, considering the still-material risks from external sector, the normalization process is expected to be implemented gradually. Therefore, the MPC deemed it necessary to leave the policy rate unchanged.

Based on preliminary estimates on economic growth, inflationary pressure from aggregate demand remains weak. The credit activity growth is moderate (13 percent annual growth in March, excluding exchange rate effect). The consumer loans declined in the first month of the year, however, mortgages in national currency and business loans are accelerating.

External demand continues to grow at a moderate pace. In particular, in the first quarter merchandise exports increased by 13 percent annualy. The growth in tourism revenues (5 percent) and remittances (6 percent) has also been moderate. It is worth to note that merchandise imports declined by 5 percent in the first quarter. The current dynamics in the external sector points to the improvement of current account deficit in 2019 as well.

The NBG will continue to monitor the developments in the economy and financial markets and will use all means and instruments at its disposal in order to ensure the price stability.

The next meeting of the Monetary Policy Committee will be held on June 12, 2019.