Latvia: Inflation at highest level in over two years
February 8, 2011
In January, consumer prices jumped 1.3% over the previous month, well above the 0.1% price increase observed in December. Higher prices were driven by an increase in the VAT rate from 21% to 22%, introduced on 1 January in order to trim the budget deficit, as well as higher prices for transport, which in turn reflected rising fuel prices. As a result of the monthly increase, annual headline inflation jumped to 3.7%, up from 2.5% in December, overshooting analyst expectations of a 3.1% rise. The reading represented the highest inflation level since May 2009. In its January macroeconomic development report, the Central Bank expects HICP inflation to average 2.4% this year.
Author: Ricardo Aceves, Senior Economist