Prices continue to rise much faster in Estonia than in the euro area as a whole
Economist at Eesti Pank
The consumer basket of Estonian consumers was up in price by 3.1% over the year in May, while inflation in the euro area was only 1.2%. Prices rose faster in Estonia than in the euro area for both goods and services.
Prices are expected to rise more slowly in Estonia in the second half of the year, and the rise is expected to average 2.3% for this year as a whole. The slower rise will be favoured in the coming months by cheaper crude oil and the government’s plan to cut excise on alcohol. Motor fuel will become cheaper in the months ahead as the price of crude oil fell on global markets to close to 60 dollars a barrel at the start of June. This means that energy price rises should gradually decelerate in the second half of the year.
Inflation may be reined back by the government’s plan to cut excise on alcohol from July. This would pull inflation down by up to 0.2 percentage point in 2019 and 2020.
The inflation in the food basket for consumers has been moderate recently. Prices for food including alcohol were 3% higher in May than a year earlier. Some 2.2 percentage points of the rise was caused by an increase of 32% in the price of vegetables as a result of unfavourable weather. Prices of milk and pork have been higher on global markets in recent months, but this has not yet been felt strongly in the European domestic market. The impact of higher prices for food commodities may reach consumer prices by the end of the year.
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