Inflation moves up moderately in April

  • Kristofers Pone

    Kristofers Pone

    Economist, Latvijas Banka
Photo by: Shutterstock
Following a rapid monthly price rise in March, changes in April were quite moderate at 0.2%. As to annual inflation, it remained broadly unchanged at 2.0% in comparison with the previous month as a result of the accelerated rise in services and energy prices observed in April 2017.

Chart 1 Annual inflation by consumption group (in percentage points)

Annual inflation by consumption group (in percentage points)
Source: Latvijas Banka


In April, prices of food (except fresh vegetables and fish) declined in monthly terms, those of seasonal non-food products (summer clothing and footwear) moved up, while services prices remained unchanged. Annual inflation remained at the previous level on account of past higher rises in energy and services prices.

In line with previous forecasts, annual inflation is expected to increase in the coming months. A rise in oil prices should be mentioned as the major risk factor which has already partly materialised. As a result of geopolitical tensions (missile attack on Syria by the US and partners) and the continued oil output curbs by the Organisation of the Petroleum Exporting Countries (OPEC), despite the fact that the global oil supplies reached a 5 year average level of OECD countries, which had been the initial goal, the average Brent crude oil price exceeded 70 dollars per barrel in April. With the US exit from the nuclear programme agreement with Iran, oil prices continued moving up also at the beginning of May. However, it should be taken into account that for the most part the initiator of the above tensions is the US, and any change in the current aggressive foreign policy stance may substantially affect future oil prices.

Despite the oil price rises of the previous months, up to now they have not notably affected oil prices in euro terms: this was offset by the appreciation of the euro against the US dollar. Consequently, fuel prices have not increased so rapidly either, i.e. the rise was mostly on account of a higher excise tax, in April reaching 7.6% year-on-year. However, at this stage the rate of oil price increase has exceeded that of currency appreciation (since mid-April, the euro exchange rate has declined) implying a potential rise in fuel prices in the coming months.

Overall, April has seen moderate price changes, while a pick-up in annual inflation will be observed in the next few months.



APA: Pone, K. (2021, 11. may.). Inflation moves up moderately in April . Taken from https://www.macroeconomics.lv/node/4129
MLA: Pone, Kristofers. "Inflation moves up moderately in April " www.macroeconomics.lv. Tīmeklis. 11.05.2021. <https://www.macroeconomics.lv/node/4129>.

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