Why Do Prices Remain High If Inflation Is Falling? - Explanation
The head of the Macroeconomics and Statistics Department of the National Bank of Georgia (NBG), Shalva Mkhatvrishvili, discussed how the inflation decrease affects product prices while visiting TV-program Analytics.
According to him, slowing down of the price growth rate does not mean that the product becomes cheaper, it means the price increase tendency is still maintained.
"If annual inflation was 2.7% in April, this means that prices increased by 2.7% compared to the last year. When we say that inflation is low, we mean that the rate of price growth is slowing down. Slowing down the rate of growth does not mean that prices are getting cheaper, but it means that the trend of price increases is maintained, but it doesn't grow as fast. Some prices may decrease and others may increase, but we look at the overall picture and prices still increased on average by 2.7% - which is relatively low.
It may be acceptable for monetary policy because relatively low inflation helps the long-term growth of the economy, but it does not mean that the price level itself decreases in the economy as a whole," he said.