The breakdown of industrial production by category of use clearly illustrates that businesses have resumed their investment activities. Domestic demand is only recovering more gradually. Interest rates drop amid lower inflationary expectations. The Central Bank's move reflected a diminished concern about inflationary pressures resulting from high oil prices and increased confidence that a further Fed hike this year is likely to be limited to 25 rather then the originally expected 50 basis points. Furthermore, the Central Bank appears to have moved away from its more cautious interest rate policy of earlier in the year to a laxer attitude seeking to facilitate the favourable growth trajectory for this year.
Inflation experiences a short-term spike.
In July, most of the key price indices registered a strong monthly uptick as a result of hikes in public utility tariffs and fuel price adjustments by the government. Additional upward price pressures resulted from cold weather that hiked clothing prices.