Current price hikes steeper than warranted by Ukraine war - Kazaks

  • 2023-03-21
  • LETA/TBT Staff

RIGA - Current price increases are steeper than warranted by the impact of the war in Ukraine, Bank of Latvia Governor Martins Kazaks said in an interview on TV3 channel Tuesday, adding that he sees certain insatiability in the current inflation dynamic. 

"Inflation in the eurozone and Latvia is definitely no longer caused by the war," Kazaks said, noting that the price hikes triggered by the war was the first wave of inflation, caused by rising energy prices, but that the energy prices have dropped by now, which means that the inflation rate should be decreasing faster, which is not really happening. 

The head of the Latvian central bank indicated that consumer prices are not dropping so fast because from the inflation of energy prices has spread to other spheres as well.

"We see that the price increases are significantly steeper than warranted by the war. I would even say that we can see certain insatiability in the current inflation dynamic - the prices are being raised just because it is possible to raise them," Kazaks said. 

He indicated that companies' profit margins are currently quite large, which is not right at a time when the economy is not really growing. "These are the so-called second phase effects - the inflation is taking root," Kazaks said. 

"Be more picky, be attentive - if you see prices going up, look at a rival company' prices, perhaps they are not going up. Shop elsewhere and do not let the prices go up," the Bank of Latvia governor advised, noting that Latvia's annual inflation is already dropping, but at an insufficiently fast rate. 

Kazaks also said that to prevent inflation from taking root, central banks are raising their interest rates to curb demand and keep prices from climbing. 

The head of the Latvian central bank expects Latvia's annual inflation to drop to a single digit figure by the end of this year. 

As reported, In February of this year, Latvian consumer prices rose by 0.6 percent against January, while annual inflation - February 2023 against February 2022 - dropped to 20.3 percent from 21.5 percent a month before, according to the data released by the Central Statistical Bureau. The 12-month average consumer price level increased by 19.4 percent in February compared to the previous 12 months.