The pace of growth in retail sales slowed at the beginning of 2008. After rapid growth of 5.4% last December, the sales increased by only 4.1% y/y in January. This can be partially explained by the introduction of fees for medical prescriptions, which led to pre-stocking in the last months of 2007 and the consequent drop in sales in January. Overall, retail sales will probably be showing a lower growth rate over the next few months in comparison with last year, the reason for this being a slowdown in the growth of real household income on the back of higher inflation. This slower growth in consumer demand should ease inflationary pressures and also the central bank’s dilemma about whether to raise interest rates to fight inflation or whether to keep them at the same level and wait till the crown’s fast appreciation has passed.