"Decreasing commodity prices in the international markets and the strengthening of the GEL allow us to say that monthly inflation will be low in the coming months, which, in our opinion, means a relatively large reduction in the refinancing rate by the end of the year," - said the chief economist in the weekly review of TBC Capital.
TBC Capital notes that June's annual inflation decreased from 13.3% to 12.8%, however, only due to the high base effect of the previous year, as compared to the previous month, taking the seasonal factors into account, prices in June still increased significantly.
"In terms of the annual inflation, the expectation of getting close to the target is realistic only for the next year; recently, the US dollar has strengthened against the other currencies in the region. Nevertheless, we think that only a low potential still exists in terms of additional strengthening of the gel.
As for the Currency Pair EUR/USD, it is quite difficult to make a forecast in the near term. Today, among the other factors, the additional weakening of the euro due to the increased energy prices led to the deterioration of the trade balance of the Eurozone. Moreover, rising risks of the global recession are a supporting argument for the dollar. At the same time, in our opinion, more reliable medium-term indicators point to a strengthening of the euro. In this regard, it is important to avoid pro-cyclical behavior as much as possible. In fact, the strengthening of the dollar indicates more that it will depreciate in a certain period, rather than the other way around," - the review notes.
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