Annual CPI inflation retreated sharply to 2.7% in Apr-23 from a 5.3% inflation in previous month, mainly due to price reductions in transport and healthcare categories along with considerable deceleration in food prices.

Core inflation (non-food, non-energy, and non-tobacco) reduced further to 4.7% (-0.3ppts m/m) in April. By categories, annual inflation was mostly driven by price changes in food and non-alcoholic beverages (+5.9% y/y, 2.04ppts), housing, water, electricity, gas and other fuels (+10.3% y/y, 1.05ppts), restaurants and hotels (+11.9% y/y, 0.45ppts), alcoholic beverages and tobacco (+6.7% y/y, 0.44ppts), transport (-12.9% y/y, -1.66ppts) and healthcare (-7.9% y/y, -0.78ppts) categories. On a monthly basis, there was a 0.7% deflation in Apr-23, driven by price reduction in food and non-alcoholic beverages (-2.1% y/y, -0.69ppts) and transport (-2.0% m/m, -0.23ppts) categories.

Given the substantial deceleration in inflation, we expect NBG to consider key rate cut on 10 May 2023 meeting, which is currently set at 11.0%.