LV: Latvian inflation of 2.1% y/y 7th lowest in EU in June-Eurostat.

By bne IntelliNews July 17, 2012
Latvia posted annual inflation of 2.1% in June 2012, which was the seventh lowest inflation rate among EU member states, according to the report by European Statistical Agency Eurostat. Estonia posted one of the highest 4.4% y/y inflation rates in the reporting month, Lithuania's inflation rate was 2.6%. Average EU and eurozone annual inflation in the reporting month was 2.6% and 2.4%, respectively. Consumer prices increased by 1.9% y/y and deflated by 0.1% m/m in June 2012, according to a report by Central Statistical Bureau (down from 2.2% seen in May, 2.8% in April, 3.3% y/y in March, 3.4% y/y seen in February 2012, after bouncing back to 4.6%-4.7% y/y in Aug-Sep 2011). To compare, CPI amounted to 11.4% in 2008, 1.2% y/y deflation was posted in 2009 and 2.5% y/y in 2010, while in 2011 4% inflation was seen. Previosuly both EconMin and FinMin welcomed the inflation slowdown, reiterating their forecasts of 2.5%-2.6% average inflation for this year. To remind, the government was alarmed by the higher than expected inflation in the beginning of the year and adopted an inflation curbing package which included cutting VAT by 1pps as of H1/12. In the end of May 2012 The European Central Bank said that inflation could postpone euro adoption in Latvia and Lithuania, which are seen as the next countries to join the eurozone. ECB believes that for Latvia it will be hard to curb the inflationary pressures in the mid-term perspective due to limited options of maneuver given the fixed EUR/LVL exchange rate. Latvia's goal is to join the eurozone by 2014. According to ECB in April average 12-month inflation in Latvia was 4.1%, exceeding the benchmark of 3.1%.

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