Inflation in July 2020 experienced a significant decline compared to the previous month, namely by 0,4 bps, to 1,54% (YoY). In fact, MtM inflation in July 2020 recorded deflation of 0,1% – the lowest level in the last 10 months. The decline in inflation was contributed by a decline in the volatile inflation component (by 2,11 bps) and core inflation (by 0,19 bps). The decline in the rate of output growth which is also accompanied by the continued decline in the rate of inflation indicates the dominance of the aggregate demand component, rather than the aggregate supply component in the economic shock triggered by COVID-19. Weakening aggregate demand is reflected in the consistent decline in the core inflation rate since March, as a form of society's adaptation to the COVID-19 economic crisis, both in the form of reduced consumption and increased savings.

Download (PDF, 336KB)