The higher oil price has clearly passed into prices
Economist at Eesti Pank
Statistics Estonia finds that prices rose by 1.3% in a month in Estonia and yearly inflation reached 3.2%. Half of the month-on-month price increase was contributed by three product groups, which were motor fuels, vegetables and air tickets. These prices are usually very volatile.
Businesses have been pushed to raise prices because of increasing costs, as wages have risen fast and there is little available free labour on the market. Price rises for imported goods have been strongest for fuels, and that rise has been amplified by the depreciation of the euro. The earlier rise in fuel prices is now affecting other prices, such as those for transport services. When the oil price rises by 10%, inflation usually gains 0.3 percentage point.
However, if the price of crude oil remains at its current level, it may be assumed that inflation will slow in the second half of the year. Inflation will slow for vegetables if weather conditions are favourable this year.
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