Estonian Inflation Accelerates to Highest Rate in 20 Months on Food, Fuel

Estonian inflation accelerated in September to the fastest pace in 20 months, mainly because of rising food and heating prices.

Consumer prices rose 4 percent from a year earlier, the biggest jump since January 2009, compared with 2.9 percent in August, the Tallinn-based statistics office said today on its website. The median estimate of three analysts surveyed by Bloomberg was 3.5 percent. Prices rose 0.8 percent on the month.

Inflation expectations in the Baltic nation of 1.3 million people are rising because of increasing food and fuel costs and concern that adopting the euro in January will boost prices. The central bank is trying to protect Estonia’s economic recovery after inflation accelerated to 10.6 percent in 2008, choking off domestic demand and contributing to the European Union’s second- deepest recession during the global financial crisis.

“While there are mainly external factors, such as energy and food inflation, behind the faster price rise, it is becoming increasingly evident that problems with competition have become serious,” said Maris Lauri, the chief economist at Swedbank AB in Tallinn, in an e-mail. “Price increases are certainly not due to too-lax monetary or budget policies. The government and responsible authorities should significantly intensify efforts to support competition.”

By Ott Ummelas - bloomberg.com

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