On current projections, in the remainder of 1999 and early 2000, inflation (as measured by the Harmonised Consumer Price Index) is expected to average close to – or slightly below – 2% – a rate that is consistent with the Bank of Greece’s definition of price stability.
The benign outlook for inflation reflects a number of important policy choices, most notably the tight monetary policy stance adopted to date, centred on high interest rates and a strong drachma. The reduction in inflation is also supported by a moderation of wage settlements. However, the current favourable inflation prospects reflect, in part, the impact of recent indirect tax cuts and other administrative measures.