Inflation growth decelerating

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Annual inflation growth continued to decelerate in November and the monthly increase in prices was negligible, thereby continuing the trend observed in the previous months.

The main contributors to the changes in inflation were the rising oil prices ahead of the OPEC meeting and lower prices in food groups like meat, butter and other fats.

According to the data by the Central Statistical Bureau of Latvia, annual inflation amounted to 2.7% in November, whereas the month-on-month price rise was 0.1%. The highest growth was reported in the energy sector, whereas the increase in food prices decelerated.

All speculations as to the potential outcome of the OPEC meeting also ended in November. As already expected, the existing oil production cuts were extended till the end of 2018, with Liberia and Nigeria also joining the agreement on curbing output. This decision was taken on the grounds that the cuts have so far proved effective and the market is approaching the pre-defined target, i.e. equilibrium. Since the start of the agreement, global oil inventories have shrunk nearly by half and the oil price already climbed to USD 62–63 per barrel in November.

However, such a policy is not entirely devoid of risks: oil production in the US, currently the cheaper alternative, is also increasing along with the growing prices, causing concerns over the effectiveness of this policy and the development of the oil market in general.

With the previous forecast remaining unchanged, inflation continued to decrease in November. The previous assumptions about the core inflation and its development are also confirmed: regardless of the overall decline resulting from the base effect, core inflation remains stable. In the near term, an upward effect on inflation can be expected from demand side factors caused by the rapidly growing wages in the circumstances of shrinking unemployment.


Annual inflation (contributions by sector)

Annual inflation (contributions by sector)

APA: Pone, K. (2018, 16. feb.). Inflation growth decelerating. Taken from https://www.macroeconomics.lv/node/3990
MLA: Pone, Kristofers. "Inflation growth decelerating" www.macroeconomics.lv. Tīmeklis. 16.02.2018. <https://www.macroeconomics.lv/node/3990>.
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