Inflation picks up steam
It would be good to say that inflation has reached its peak; nevertheless, critical months with more possible inflation rate surprises in store lie ahead.
In July, consumer prices in Latvia grew by 21.5% year-on-year. Several populated areas already saw the new heating tariffs taking effect, while the population making level payments for gas was the first to notice a substantial rise in gas tariffs. July also witnessed mounting energy prices; at the same time, the prices of other services and goods took an upward trend as well.
In autumn, inflation could be somewhat slowed down by the planned government support. Indeed, it should be noted that these measures do not weaken the inflation statistically but rather help households with either the lowest income or highest increase in costs live through this period.
Meanwhile, the beginning of the next year will once again be more challenging, taking into account a possible further rise in gas tariffs and dilapidated savings owing to both the previous heating season and mounting prices.
A recent article by Mārtiņš Kazāks provides a rather detailed information on both the causes of the elevated inflation and possible solutions; it is available here in Latvian only. Not to repeat myself, I would like to add that there is no easy way out, we have to take many small but important steps, including energy efficiency improvement, a wider use of renewables, government support for the more vulnerable groups of the population, as well as the decisions made by the European Central Bank on using the monetary policy instruments for reducing inflation. This time, waiting for others to act will not be enough, inflation will be more easily weathered by those who rethink their consumption and, if possible, make it more efficient.