Inflation still rising in Estonia, Lithuania

VILNIUS/TALLINN 's Latest inflation figures show that consumer prices are still on the rise in the Baltic region, though the rate of increase was lower than some analysts predicted.

In December 2007, Lithuania's inflation rose to 8.1% year-on-year (0.5% month-on-month) up from7.8% y/y (1.1% m/m) in November.

In Estonia during the same period , consumer prices were 9.6% higher y/y and 0.7% m/m.

The index was mainly influenced by the increase in the prices of food, transport and heating.

Analysts at Danske Bank were among the first to comment on the Lithuanian figures, saying that "decreasing prices of clothes and telecommunications services reduced somewhatthe pressure on the inflation level.The acceleration in inflation will be stronger at the beginning of 2008, mainly due to a rise in gas prices and an increase in excise duties for fuel."

But there was some good news when Danske pointed out that the Baltic economies so far seem to be escaping the attentions of currency speculators causing problems in the rest of 'emerging Europe'.

"We are seeing several currencies under heavy selling pressure 's most notably in the Romanian and Icelandic FX markets. In the credit markets we in general see... yield spreads widening in Romanian, Bulgarian, Kazakh, and Icelandic markets. It is significant that there is no pressure in the Baltic markets, which normally have been trading in line with the other "suspects," Danske points out.