Low inflation to persist in the coming months

Consumer price level did not change in April compared with March. Annual inflation stayed at 0.2% like last month. Low inflation increases households’ real purchasing power and supports consumption. Strong domestic sales balances somewhat companies’ weak exports sales.

In April, inflation was pushed down by cheaper electricity, heat energy and transport. Motor fuel was 3.4% cheaper than in the same month last year. Energy prices were pushed lower by favourable weather conditions, increased competition in the electricity market, and strong euro, that has lowered the price of oil in euros.

Inflation rate was lifted by increased prices of alcoholic beverages, tobacco, and dairy products. Excise tax hikes will contribute to the price increases of alcohol and tobacco also in the future. Food prices are also expected to continue rising in the near future in Estonia as well as globally as recent droughts and floods have hit key agricultural regions.

Swedbank expects price increase to remain low due to cheaper energy and transport prices in the coming months. We expect the euro to gradually weaken against the USD as the ECB is expected to take action in June. This would push up Estonia’s inflation somewhat later this year.

Source: Swedbank

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