Towards a normalisation of inflation

The ‘Stabbiltà’ initiative has stopped a trend of rising food prices that had been going on since 2021.

The contribution of food prices to overall inflation in February was the lowest on record since December 2021, when it stood at 1.1%. So, essentially, in a month following the launch of the Stabbiltà initiative by the Government, the contribution to overall inflation of food prices was reset to what it had been 26 months earlier.

What is equally important is that, whereas before February Malta’s food prices were soaring up while those in other European countries were falling, now there is a guarantee that, till Budget Day, prices will remain stable for some 450 items. This will lead to a normalisation of inflation and a return to the low inflation environment that we had in Malta before the Ukraine war started.

According to the National Statistics Office, last month retail price inflation stood at 2.3%. This was the lowest rate since September 2021, and well below the average rate of 2.6% observed during the last Nationalist administration.

In January, retail price inflation was 3.2%, or more than a third higher than February. The decline observed between January and February was only marginally smaller than the decline which had been observed when electricity tariffs had been reduced by 25% in March 2014.

The decline in food prices, 1.2%, was the largest month-on-month drop experienced in food prices in more than seven years. The Stabbiltà initiative, thus stopped a trend of rising food prices that had been going on since 2021.

For the last months, our food inflation rate had diverged from that in other countries, including similar island states affected by the same change in transport costs faced by our importers.  

Following the decline in food prices in February, food prices now contribute 1.2% of our overall inflation rate. Back in January, food prices contributed 2.0%, which means that the development of food prices in February reduced overall inflation by 0.8%.

Photo: Gustavo Fring

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