As a result, as with most – if not all – countries, the domestic inflation environment has become more challenging. In June 2008, inflation stood at 11.4 percent compared to 2.3 percent in the same period last year, bringing the average inflation for the first six months of 2008 to 7.6 percent.
Of late, we have started to see stronger signs of second-round effects, with core inflation rising and inflation expectations trending upwards. To prevent these inflation pressures from further feeding into the price- and wage-setting behavior of economic agents, we raised our policy rates by 25 basis points on 5 June and 50 basis points on 17 July.