Data from Statistics Estonia show that yearly consumer price inflation slowed in January to 3.7%. The rise in prices mainly came from higher electricity prices. Disregarding the rise in electricity prices, the rest of the consumer basket was 2.9% more expensive than a year ago.

The cold weather in January meant that the exchange price of electricity was close to double of what it was in December. While December had been much warmer than usual, January turned out to be one of the coldest starts to the year in recent times. Electricity is around 5% of the consumer basket, and so fluctuations of that size have a substantial impact on the aggregate indicator for inflation. The increase in electricity prices added one percentage point to consumer prices in January. Given that February is also forecast to be colder than usual, the prices of gas and wood chips will go up as well, making heating more expensive over the coming months.

Food prices continued to go up rapidly in January, 6% year-on-year. Seasonal factors drove up the prices of fresh vegetables and fish products. The prices of alcoholic beverages increased by 5% after the discount campaigns of December ended, and the rise was further supported by higher excise duty rates. At the same time, lower prices for raw materials are helping to slow the overall increase in food prices this year. On the European Union market, the price of butter has fallen by 43% over the year, which usually translates into lower prices for other dairy products. Sugar and cocoa became cheaper on world markets last year, although the price outlook for coffee is still uncertain.

However, the temporary volatility in electricity prices has no impact on the broader trend of slowing inflation. Import prices are helping to restrict price increases this year, and domestic cost pressures are also offset by productivity growth. Tax increases will have a smaller impact this year compared to last year, contributing about one percentage point to inflation. Eesti Pank forecasts that the average annual inflation rate will be close to 3%.

For further information:
Hanna Jürgenson
Communications officer
Eesti Pank
5692 0930
Press enquiries [email protected]