Bank of Estonia: Price growth to decelerate in second half of 2018

The Bank of Estonia is the country's central bank. Source: (Martin Dremljuga/ERR)

Economist at the Bank of Estonia, Sulev Pert said that the bank expects price growth to decelerate in the second half of the year due to the impact of a higher reference base.

"The impact of a higher reference base is reflected in the price growth. In conclusion of this year, the price level will rise by approximately 3%," Pert said in a press release.

Consumer prices in June rose by 4% on year and by 0.9% compared to the previous month. "The reason for this was both the price increase of energy and services. While the increase in the price of energy is mainly based on the increase in the price of oil on the world market, the price growth of services is accelerated by a dynamic salary growth," Pert said.

"More expensive solid and motor fuels have pushed energy prices in the last few months. In June, the 9% increase in the price of electricity also added to the development and affected the consumer basket by 0.3%. The future transactions of electricity on the Nordic electricity market indicate that the current high price rate at €50 per megawatt-hour will hold until the beginning of the next year."

According to Pert, higher electricity prices in the winter months will mean a €4 to €8 higher electricity bill for the average household. "In addition to the increase in the price of electricity, other goods groups in the consumer basket in this case will also see higher prices due to the increase in the price of production. This indirect effect will nevertheless raise the price level a little, as electricity makes up only a small portion of companies' overheads," he added.

Pert said that the market is expecting a drop in the stock exchange price of electricity in spring 2019.

The Estonian consumer price index rose by 4% on year in June 2018, and by 0.9% compared to May. The last time that the change was over 4% was in November 2017 at 4.2%, Statistics Estonia said.

Compared to June 2017, goods were 4.1% and services 3.9% more expensive. Regulated prices of goods and services have risen by 11.2%, and non-regulated prices by 2.1% compared to June of the previous year.

Editor: Dario Cavegn

Source: BNS

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