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"Economic growth started in the external environment last year, which is gaining carrying capacity, and with it the risk of inflation acceleration has increased. Some of larger central banks of countries outside the euro area have already decided to raise monetary policy interest rates," Sulev Pert, economist at the central bank, said in a press release.

"The economic activity of the countries of the euro area has also increased, but its impact on the prices have so far been weak. The consumer basket of the euro area in March increased 1.4% according to initial assessment," he added.

The change of the Estonian consumer price index in March 2018 was 2.8% compared to March of the previous year, Statistics Estonia said. The consumer price index did not change compared to February 2018.

The price growth of food in March amounted to 5.1% and 1.7%age points of it resulted from the higher rates of excise duty on alcohol that entered into force during the year. Even though the price growth of food has decelerated slightly in the last few months in Estonia, it is nevertheless one of the fastest among eurozone countries.

Food prices in the euro area rose 2.2% on year in March. The price growth of food will have a greater impact on poorer households, whose consumption basket includes a greater share of necessities. Food makes up 36% of the consumption basket of households belonging to the first, that is the lowest quintile of wage earners, while 24% of income is spend on food in richer households.

Housing expenses hold second place in terms of size in the consumption basket and their price growth in March accelerate to 4.2%. The increase in housing expenses was caused by a 8.5% higher rent and 10% more expensive electricity. However, price growth during this heating period has slightly been held back by thermal energy, the price level of which has not changed much.

The data of the companies' survey of the Estonian Institute of Economic Research indicates that in the future, services will contribute more to price growth.