Martin Lindpere, Eesti Pank, economist

In September, the CPI basket became 0.6% more expensive and year-on-year price growth dropped to 10.5%. Since the excise duty on tobacco was raised in summer, the price of tobacco products grew 22%, playing a major role in the September price increase and accounting for nearly two-thirds of the month-on-month price hike.

The recent monthly price increases have been clearly lower than at the beginning of this year and at the end of 2007. Leaving aside inflation stemming from excise duty increases, the price level of the past six months has risen 3.3%.

The domestic factors of price pressures keep subduing, and this development is aided by slowing wage growth. The price rise of services has dropped to 8.7% from the 11% observed at the start of the year. The 2.9% decline in rent prices refers to a low in the real estate sector.

Food prices cheapened by 0.5% in September. The 13.9% year-on-year price growth still reflects the price hikes that took place in the second half of the previous year. During the past six months, food prices have grown just 1.1%.

The October inflation is temporarily accelerating due to the price rise of natural gas and thermal energy. Recent weeks have seen a heavy drop in global energy prices - a development which should also pass through to the Estonian energy prices. Preliminary data show that inflation in Europe constituted 3.6%. Looking at the uncertainties prevailing in the global economy, price pressures are sure to decline in both Europe and Estonia.

Eesti Pank's next inflation forecast is published on 22 October together with the autumn economic forecast.