The Bank of Estonia commented on the latest July inflation data, nothing that despite electricity and food prices exercising the largest pressure on the consumer prices, the impact of the electricity prices somewhat eased. The CB notes that in past month electricity contributed the most to prices’ volatility.

The central bank also stressed that despite food prices’ growth in July, all of its segments apart from fruits and vegetables remained stable. Also core inflation remained low at 1.3% y/y in July. The Bank of Estonia reiterated its forecast of 3% average HCPI for 2013.

CPI inflation amounted to 3.4% y/y and -0.1% m/m in July (3.8% y/y and 0.5% m/m in June), Statistics Estonia reported. Prices growth moderated in July. Previously accelerating in February to 3.7% y/y on high food prices, consumer prices declined for two consecutive months and rebounded slightly in May.

Average consumer price increase for 2012 overall stood at 3.9% y/y, while in 2011 average inflation was 5%, in 2010 average inflation was 3% vs. 0.1% deflation in 2009 and 10.4% inflation in 2008.

The Bank of Estonia last month believed that risks to price stability increased both externally and domestically. Improved outlook on external growth in H2/13 might raise the prices of imported raw materials. Domestically higher labor costs in H1/13 could pressure prices upwards, especially through services. July’s data did not yet confirm these concerns.