Bank of Latvia in­creases in­fla­tion out­look for 2017 to 2.7%

Baltic News Network - - News -

The Bank of Latvia has in­creased its in­fla­tion out­look for 2017 from 1.6% to 2.7%, as re­ported by the bank’s press-ser­vice.

On Thurs­day, 23 March, the Coun­cil of the Bank of Latvia de­cided to in­crease the in­fla­tion out­look for 2017 af­ter re­view­ing the macroe­co­nomic anal­y­sis and spe­cial­ists’ re­port on the sit­u­a­tion in Latvia’s na­tional econ­omy and the world.

«Food prod­uct price ten­den­cies around the world and oil price rise in com­par­i­son with the same pe­riod of 2016 show that in­fla­tion will likely rise more rapidly than ex­pected this year,» the cen­tral bank re­ports.

The Bank of Latvia adds that in Jan­uary 2016 oil prices around the world had de­clined to the low­est level in the past twelve years – to USD 30 per bar­rel. Since then, how­ever, an oil price in­crease trend has been no­ticed, with oil prices reach­ing USD 55 per bar­rel in the mid­dle of the year. This is al­ready re­flected in fuel prices. It will con­tinue in­creas­ing prices of other goods and ser­vices.

In par­al­lel to the world price rise on food prod­ucts also in­creased food prod­uct re­tail prices in Latvia. This in­crease was af­fected by mul­ti­ple fac­tors, in­clud­ing the ris­ing trend for prices on milk, meat and sugar, as well as the more re­cent trends: price rise on an­i­mal feed and in­creased de­mand for fresh milk.

At the same time, the Bank of Latvia men­tions that the in­flu­ence of de­mand on in­fla­tion will likely re­main un­con­firmed. «The na­tional econ­omy still re­mains in a state of macroe­co­nomic bal­ance, with un­em­ploy­ment re­main­ing close to its nat­u­ral level for four years. Prices that are not reg­u­lated ad­min­is­tra­tively and which re­flect the in­flu­ence of in­ter­nal de­mand grow at a mod­er­ate pace. It is re­flected in the base in­fla­tion in­dex, which will re­main only slightly above 1% this year,» Bank of Latvia notes.

The bank also men­tions that mar­ket lib­er­al­iza­tion may re­sult in a more rapid climb for nat­u­ral gas prices. «The top­i­cal in­fla­tion out­look in­cludes the assess­ment of cer­tain nat­u­ral gas tar­iff com­po­nents. Un­cer­tainty re­mains high, how­ever,» the bank’s rep­re­sen­ta­tives add.

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