In September the inflation rate was the lowest in three years
Head of the Economic Policy Division, Eesti Pank
According to Statistics Estonia the deceleration of inflation continued in September and the annual growth of the price level in Estonia dropped from 2.9% to 2,1%. This was the lowest rate in three years. Inflation in the euro area was also the slowest in the last three and a half years – 1.1% according to the preliminary estimate. This was largely due to the fall in energy prices.
In September the cost of energy for the Estonian households increased by 4.2%, year-on-year. The growth of energy prices was dampened by motor fuel prices which fell 6.5%. Electricity, however, was 31.2% more expensive for households than a year ago. The cost of the consumer basket excluding electricity grew 0.9%.
In September food prices increased by 3.2%, year-on-year. The inflation of food was restricted by the lower level of food commodity prices in global markets compared to last year. The prices of cereal in international markets continued to fall in September, but the prices of milk, meat, oil and sugar grew which could influence Estonian food prices in the coming months.
The 0.2% fall in services prices kept the core inflation on a low level and it slowed to 0.6%. The lower price of services was mainly due to the 10.6% fall (year-on-year) in communication services. The fact that the reform of higher education has made it possible to study for free had a big impact this autumn and it lowered the inflation rate by 0.3 percentage points. Prices of other services grew by 3.8% in September which confirms that the wages that have risen rapidly this year have already raised the prices of services for consumers.
According to the Eesti Pank’s June forecast in 2013 consumer prices in Estonia will grow 3.0%.
The primary objective of the central banks of the euro area is to maintain inflation in the euro area at below but close to 2% over the medium term. The fact that Estonia's inflation is slightly higher than the euro area average is to be expected and is a consequence of faster economic growth and harmonisation of relative incomes with those of the euro area.
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