Estonian central bank expects price rises to continue at current pace

The Bank of Estonia expects prices to keep rising in the coming months at roughly the pace seen in September and October, economist Lauri Matsulevits told ERR’s Aktuaalne kaamera news programme.

Matsulevits said motor fuel prices jumped after the war in and around Iran began in spring, with transport services also becoming more expensive. But underlying inflation, which excludes energy and food, did not clearly accelerate over the summer. It stood at 1.8% in October, a rate he said was typical compared with other euro area countries and below the euro area average.

Food prices rose somewhat in October after falling over the summer. Meat and dairy products continued to become cheaper, while fresh vegetables saw a substantial price increase in September and October. Matsulevits said higher transport costs may have contributed, but also pointed to poorer harvests in Poland, the Netherlands and Spain.

Natural gas prices have risen sharply and are now about three times higher than at the start of the year. Estonia produces virtually no electricity from gas, Matsulevits said, but when wind power is scarce, gas-fired plants in the region influence prices, feeding higher gas costs into the electricity exchange price.