Orsolya Soosaar, economist of Eesti Pank

Based on the consumer price index of Statistics Estonia, inflation slowed to 4.9% in June, while the price level did not change from May.

The rise in food prices slowed in June mainly because of a drop in fruit and vegetable prices, which was higher than could be expected from usual seasonality, at 7% and 4.6% respectively. The fall in vegetable prices was partly caused by a decline in demand in Europe. The price level of unprocessed food on the global market decreased by 10% in the first half of the year, which should ease further upward pressure on the prices of ready-to-eat food.

Household energy prices rose by 0.6% from May. Motor fuel prices went down by 1.1% primarily owing to the strengthening of the euro, while the import price of natural gas raised the price of thermal energy by 2.6%.

Based on the spring forecast of Eesti Pank, inflation will slow further in the second half of 2011. The Harmonised Index of Consumer Prices is expected to rise by 4.7% in 2011.

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Ingrid Mitt
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