Average inflation in Bosnia and Herzegovina

Average annual inflation measures the mean rise in consumer prices in Bosnia and Herzegovina over a year, calculated as the average of the twelve monthly inflation rates. It condenses the year's inflationary pressure into a single figure.

It builds on the consumer price index (CPI) compiled by the Agency for Statistics of Bosnia and Herzegovina (BHAS) from a regular price survey. The annual average compares the year's mean index with the previous year's, unlike end-of-period year-on-year inflation; long-run series usually come from the IMF.

Inflation erodes households' purchasing power and is a sensitive figure in a country with a currency board (the convertible mark is pegged to the euro), which limits monetary-policy room and passes much of the imported inflation through from the euro area.

Being a yearly average, it smooths peaks and troughs and lags behind end-of-period year-on-year inflation. It only captures the prices in the defined basket, and for the underlying trend it is worth watching core inflation, which strips out energy and unprocessed food.