RIGA - Analysts raised their annual inflation forecasts for 2006 after consumer prices in July soared 0.6 percent, the highest jump for the summer month since 1994.
Zigurds Vaikulis, head of market analysis at Parex Asset Management, said that the July inflation figure was "shockingly high," since the month traditionally shows deflation. "Usually deflation in July is due to price reductions in the food product group. Without it, there can be no deflation," he said, adding that it was difficult to say why prices for vegetables and fruit failed to move down this summer. "Whether it's weather, fuel costs, wages or something else 's we can only guess."
Vaikulis still believes Latvia will see deflation in August, and there is hope that annual inflation will manage to drop below the 6-percent level in September. But as utility charges are set to increase in October, inflationary pressure is certain to strengthen again.
Olga Ertuganova, an analyst at DnB NORD Banka, said, "Regretfully, it has to be said that the average annual inflation in 2006 will again be above 6 percent and may even rise to last year's level, approaching 7 percent," she said. Annual inflation in Latvia from July 2005 's July 2006 amounted to 6.9 percent.