Eamets: Autumn will not bring relief from inflation

TALLINN - Raul Eamets, chief economist at Bigbank, stated that inflation accelerated in September and predicts that the autumn will bring no relief.

"This summer, we were getting used to an inflation rate of two percent or less year-on-year, a level the European Central Bank considers reasonable," Eamets said. "However, on Friday, Statistics Estonia released its flash estimate of the harmonised index of consumer prices for September, which showed a year-on-year price increase of 3 percent - double the rate seen in August."

"Looking ahead to the autumn, it's clear we cannot expect a slowdown in price growth. The main reasons are the ongoing oil and gas crisis and the uncertainty surrounding the Strait of Hormuz. This is compounded by the actions of the Houthis in Yemen, who have successfully blocked shipping in the Bab el-Mandeb strait - a key maritime gateway connecting the Indian Ocean and the Red Sea to the Suez Canal," Eamets explained.

"Today, most cargo ships are sailing around Africa for fear of Houthi attacks. Nearly a quarter of the world's maritime transport passes through these straits, and blocking them increases the cost not only of oil and gas but of all goods transported by sea from Asia to Europe," Eamets said.

"Rising energy prices continue to have the greatest impact on inflation. As autumn progresses, demand for heating and electricity will grow, pushing energy prices even higher. This will be particularly painful for local governments and private consumers who rely on natural gas, as gas prices are already very high and are set to rise further with increasing demand across Europe. Alternative fuels such as wood pellets and firewood have also become more expensive due to increased demand. The rising price of diesel will, sooner or later, translate into higher consumer prices through increased transportation costs. Therefore, we should expect inflation to accelerate this autumn," Eamets added.