Bank of Estonia: Record energy prices means inflation will not recede

Bank of Estonia (Eesti Pank) headquarters in Tallinn, the bank also has a museum open to the public.
Bank of Estonia (Eesti Pank) headquarters in Tallinn, the bank also has a museum open to the public. Source: Siim Lõvi /ERR

Yearly inflation reached 8.8 percent in November as the price level stood 1.8 percent higher than in the previous month, the Bank of Estonia announced on Tuesday. Cost of living is most affected by the rising energy prices as around half of the increase in the cost of the consumer basket has come from electricity, gas and motor fuels.

Inflation has been rising faster and become more broadly based in Estonia this year, and it is now being driven by food products as well as by energy and manufactured goods, the central bank wrote on its homepage.

Energy prices continue to rise rapidly, as the price for electricity was 49 percent higher in November than a year earlier, while the cold weather in early December lifted it to new record levels temporarily. Higher electricity prices affect inflation directly and also indirectly through the cost of many other goods and services, but this impact will only be apparent in the coming months.

Electricity costs are on average 0.8 percent of the total expenditures of businesses. Their share in total expenditures is largest at around 10 percent in paper production and water supply. High electricity prices may push some companies to reduce production or to pause it, because higher costs cannot always be passed on into end prices for products.

The price of natural gas was up 60 percent over the month, and this will soon pass through into the price of heating energy. The largest single leap in prices is expected to come in December.


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Editor: Kristjan Kallaste

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