TALLINN - Estonia’s inflation rate climbed more than expected to the highest level in 22 months in October, driven by higher prices for food, reports Bloomberg. Consumer prices rose 4.7 percent from a year earlier, the biggest increase since December 2008, following a 4 percent rise the previous month.
“Unfortunately there are no signs pointing at a slowdown in inflation,” said Maris Lauri, chief economist with Swedbank in Tallinn, in an e-mail. “In the short term, prices will only rise.”
Estonian companies must not try to use the adoption of the euro on Jan. 1 as an excuse to demand more money for their goods, Finance Minister Jurgen Ligi said last month. The central bank has warned that higher prices may hamper a recovery.
Inflation will “stabilize ahead as raw-material price growth is slowing,” central bank economist Martin Lindpere said in an e-mailed statement.
Food and non-alcoholic drink prices rose a monthly 2 percent and added 8.9 percent from a year earlier, accounting for almost 80 percent of the total increase, the Estonian statistics office said. Dairy prices added an annual 20.7 percent and vegetable prices jumped 36.8 percent, it said. Overall, prices rose 0.6 percent in the month.
Estonian prosecutors and competition authorities have started two inquiries into possible bread and dairy cartels since August after the bread producers lobby announced plans to boost prices by 10 percent to 20 percent that month.
Most leading retailers raised milk prices by 25 percent at once in September. The September increases in milk prices came at the end of the month, and therefore did not affect September data, the statistics office said last month.
Director of the Estonian Institute of Economic Research Marje Josing remarked that the price growth is testing individuals’ purchasing capacity but that it is likely that after a while, prices would start falling again.