In line with its anticipated trajectory, the annual CPI inflation rate saw a steeper downward path in the last quarter of 2018. The indicator went down to 3.4 percent in November and subsequently decelerated to 3.3 percent in December, thus moving deeper into the band associated with the flat target of 2.5 percent ±1 percentage point. Both in November and December, the actual annual inflation rates were below the benchmark projection set out in the November 2018 Inflation Report, reflecting primarily supply-side shocks associated with falling international oil prices, as well as with the decline in citrus prices amid the bumper crop at a European level. The downward trend of the annual inflation rate in Q4 was driven by developments in all consumer basket components, including those in the adjusted CORE2 index, whose dynamics came in at 2.5 percent in December 2018, decelerating from 2.8 percent in September. At the same time, however, the average annual CPI inflation rate continued to rise from 4.5 percent in September to 4.6 percent in December. The average annual HICP inflation rate followed a similar path, adding 0.3 percentage points from 3.8 percent in September to 4.1 percent in December. The differential versus the EU average remained high, i.e. above 2 percentage points.

1. Inflation developments

2. Economic developments

3. Monetary policy and financial developments