Estonia to meet the Maastricht inflation criterion in the next months

According to Statistics Estonia, the year-on-year fall in prices accelerated to 1.6% in September. Prices continued to decline also in euro-area countries, where the consumer basket cheapened by some 0.3% in September.

The price level in Estonia lowered by 0.2% compared to August. This was mainly caused by a reduction in the cost of food and motor fuel. Food cheapened due to both the continuing low in export markets as well as seasonality. The prices of milk and dairy products are about one sixth lower compared to the peak observed a year ago. The mark-ups added by grocery stores have, on the other hand, increased, rising from 19% in 2008 to 20% in the second quarter of this year.

The domestic situation in Estonia facilitates even steeper price declines. The price level of commodities is also affected by the strengthening exchange rate of the euro, which exerts pressure on domestic prices, since it lowers the cost of imported goods. The behaviour of consumer prices in the future will be strongly impacted by oil price fluctuations, which in turn depend on global economic developments.

Estonia will meet the Maastricht inflation criterion either in October or November, when the 12-month average inflation growth drops below 1.5%.

Source: Statistics Estonia

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