Analytics, Inflation, Latvia, Markets and Companies

In August, Latvia traditionally recorded deflation, with average consumer price level reducing 0.5% from July. This was mostly due to lower prices of seasonal vegetables and lover prices of energy resources. Fuel prices fell more than 5% from July, and heating rates for households also became slightly less expensive in August. On the other hand, higher excise tax on alcoholic beverages had an upward effect on the consumer price level.

As compared to August 2014, consumer prices this past August increased 0.1%. The untypically-low inflation in Latvia is largely an "imported" phenomenon, notes Citadele. Lower fuel and other prices that are determined by oil prices cut Latvia's annual inflation by about 1.5%age points in August. The steep decline in oil prices began last fall, therefore deflation caused by lower oil prices will gradually reduce toward the end of the year.

At the beginning of this year, Citadele experts said they expected average inflation in Latvia to not exceed 1% in 2015. However, due to lower utility tariffs caused by the reducing oil prices, the average annual inflation this year is forecast at 0.4% to 0.5%.