Data from Statistics Estonia show that inflation remained high in May, touching 20% over the year. The price level was 1.9% higher than in the previous month. The biggest impact came from higher prices for electricity and motor fuels. The usual seasonal fall in electricity prices has not happened, and the exchange price of electricity has become very volatile. The oil price has continued to rise on global markets and fuel prices have been pushed up further by the depreciation of the euro exchange rate. The Russian war in Ukraine is causing prices to rise for food and for inputs needed in production.

Inflation will remain high in the coming months. A large part of the rise in the price of the consumer basket comes from increased spending by households on energy, and futures transactions show the price of energy will remain high for the time being. More expensive energy passes through production and distribution costs into the prices of other goods and services, making inflation more broadly based and probably more lasting, because it takes time for the impact of energy prices to pass through. This means that no major fall in inflation is expected in the near term.

On top of the inflation caused by cost pressures, there is also inflation caused in Estonia by strong demand, as rapidly rising wages, the savings accumulated during the pandemic, the release into circulation of the money withdrawn from the second pension pillar, and increased spending by the state have all also contributed to inflation. That high inflation has allowed companies to raise prices faster than their costs have risen is shown by the strong growth in profits. The increase in profits also means that average growth of 10% in wages is not yet proving very painful for companies.

Additional information:
Hanna Jürgenson
Eesti Pank
Tel: 668 0965
Press enquiries: [email protected]