Inflation continued to slow in February
Economist at Eesti Pank
Data from Statistics Estonia show that yearly consumer price inflation slowed in February to 17.6%. Inflation peaked last August at 25% and has since come down. Energy prices have fallen steadily in recent months and the market prices of gas and electricity are now back to where they were in September 2021. The price level in February was 0.6% higher than it was in the previous month as food and services put pressure on prices.
A contraction in the economy and a fall in demand mean that many companies are no longer able to raise their prices as fast as before. The outlook for inflation is uneven across sectors. Data from the Estonian Institute of Economic Affairs show that the price expectations of companies have dropped sharply in manufacturing as demand for exports has weakened. Surveys show that only a few companies in retail and services expect prices to fall in the months ahead. Domestic inflation is being driven by rapid growth in wages and the low rate of unemployment.
Inflation is expected to continue falling steadily throughout the year, and it should be under 10% by summer. The Estonian inflation rate for 2023 as a whole should still be around 9% though.
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