Not only overall inflation, but also its core component increased in March. According to data from the Bank of Albania, core inflation increased by 2.5% in the third month of the year, from 2.33% in February.

On the other hand, core inflation declined on an annual basis. In March of last year, this indicator was at 2.73%.

Core inflation is calculated by the Bank of Albania for a group of goods and services that occupy 69% of the weight in the overall basket of the Consumer Price Index. It mainly excludes those products that have high volatility, food and energy products, and its main purpose is to strip the overall increase in prices from fluctuations of a shorter-term nature.

Core inflation is more closely linked to domestic inflationary pressures, which after 2022 have been largely driven by rising business labor costs.

In parallel with core inflation, net core inflation for March also increased to 2.26%, from 2.09% in February. However, net core inflation is also on an annual decline compared to 3.1% a year earlier.

Net core inflation further excludes processed food subgroups (including bread and cereals) from inflation and is measured at 44.6% of the CPI.

Meanwhile, inflation excluding all food and energy products for March was at slightly lower levels compared to net core inflation, at 2.17%, down from 2.08% in February and 3.05% in March last year.

According to INSTAT, total inflation in the economy, measured for the entire basket of consumer goods and services, returned to growth in March, to 2.1%, from 1.9% in February.

It seems that the increase in inflation in the economy mainly reflects the increase in its core component. A gradual increase in inflation during this year would be in line with the Bank of Albania's baseline scenario. The expectation for growth is based on low interest rates and rapid lending to the economy, the stabilization of the lek exchange rate, and the mitigation of the downward effect of imported inflation, Monitor reported.