Bank of Estonia vice-chair: Minister criticism points to our independence

Ülo Kaasik.
Ülo Kaasik. Source: ERR

Criticism of the Bank of Estonia issued by IT and foreign trade minister Kristjan Järvan (Isamaa) is no cause for concern, and is rather more a tacit recognition of the its independence politically, Vice President of the central bank Ülo Kaasik says.

Kaasik told ERR's radio news that this was not the first time politicians had criticized the central bank, if the politician's view does not coincide with the bank's.

He said: "However, I think in a way this also indicates that we are independent. We always carry out analysis and we look at factors that we think are important, and we certainly point them out."

Järvan's comments were, consequently, not a worry for the bank, he said.

"The Bank of Estonia's only political agenda is to fulfill its tasks as granted by law. The main one of these is to ensure price stability, to contribute to ensuring that within the eurozone. We conduct analysis on all factors that affect prices, and then give our assessment," he went on.

As to inflation, Kaasik said that since historically, it had run in the two-to-four-percent range, even a few percentage points higher than this would have a significant effect, and while 20 percent or more did not look good, it was still manageable via correct monetary policy – while at the same time, world prices of commodities such as oil and gas were not something Estonia could easily influence.

The demand side on the domestic front could be more easily managed, he added, while Estonia's economy had bounced back from the Covid crisis effectively, wages were growing and unemployment has fallen, while the liberation of the second pillar of the Estonian pension system put in place by the Center/EKRE/Isamaa administration (and masterminded by Järvan, in fact) had, all told, provided around a billion euros of additional income to households, which, he said, helps cope with the current inflation, while it is not clear to what extent the pension reform – which made employer/employee contributions optional where they had been mandatory for most wage-earners – had significantly contributed to inflation.

Demand is also healthy, he added, which is an added reason for companies upping prices, and the blame cannot always be placed on soaring energy costs.

In late July, a Järvan-penned opinion piece which appeared in daily Postimees found that analysis by the Bank of Estonia which put the current, record rates of inflation down to second pillar pension withdrawal was among the most incompetent economic analysis of recent history.

Inflation stood at just under 23 percent in July.


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Editor: Andrew Whyte

Source: Uudis+, Arp Muller

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