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Labour data in focus

18.11.2016 10:50:00 | Autor/Izvor RBA analitičari

Thursday brought the CPI release for October which confirmed deflationary environment but at a slower pace (-0.5%yoy). Compared to the previous month the inflation rate rose by 0.4% mom, primarily thanks to prices of clothing and footwear which increased by 6.4% mom. By the end of the year we expect negative CPI rates on annual basis to be retained, continuously supported by further deflationary pressures from abroad. A slow and mild recovery in prices at global commodities markets (primarily of crude oil and food) is expected to spill over to domestic prices so in addition to a base effect the average rate of inflation is expected to return to positive figures in 2017.
The CNB announced the last out of the four 4-year structural repo operations planned for this year. Due to ample HRK liquidity and still subdued demand for loans, we expect relatively modest interest. However, the LTRO is expected to put additional pressures on the longer-end HRK curve. As for FX movements we do not expect any significant impact given that healthy surplus in the balance of payments current account, much reduced fiscal risks, inflow of FCY stemming from an extended tourist season, the strengthening of investment activity, and positive net external position held by banks already gives support to the local currency.

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