Price rises in Estonia, eurozone seen converging

The difference between the Estonian and eurozone inflation rates is the smallest in recent years and inflation in Estonia is unlikely to accelerate markedly in coming months, the Finance Ministry and the central bank say.

Estonian consumer prices rose 0.6 percent year on year in February compared to a 0.8 percent increase in harmonized consumer prices in the eurozone. It is estimated that the Estonian harmonized index of consumer prices, which takes into account also the structure of spending by foreign tourists, may have dropped to nearly 1 percent in February. Thus, the inflationary difference between Estonia and the eurozone was the smallest in recent years, the Finance Ministry says in its commentary to consumer price statistics published on Friday.

Both the Finance Ministry and the Bank of Estonia note that price rise slowed down first and foremost due to the receding of external price pressures and lower heat and fuel prices. Besides, electricity and heat energy are indexed under services, which explains the overall decrease in the cost of services in a situation where many other service prices are rising.

Base inflation, that is, price rise of goods and services without food and energy, remained at the 0.8 percent level in February. Leaving out the impact of the drop in the cost of communication services, the price rise of services amounted to 3.4 percent, the central bank observed. Due to deceleration of import price rise, price rise of manufactured goods also continued decelerating and slowed down to 0.4 percent last month.

Unless unexpected external price pressures emerge, inflation in Estonia will remain at the current low level in the first half of the year, the Finance Ministry predicts.

According to the central bank’s forecast, inflation will stop at 2.1 percent in 2014.

Source: Baltic News Service via Estonian Review

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