Flash Comment - July 8, 2011
Latvian CPI grew by 0.3% mom (4.8% yoy) in June 2011
Largely in line with our expectations, Latvian CPI rose by 0.3% mom in March. It was predominately driven by rising housing related expenses (+1.2% mom) due to raised heating tariffs and alcohol and tobacco (+2.2%) due to higher excise tax. Over the next few month annual inflation is expected to linger close to 5%. To cut inflation it is not sufficient to stop raising taxes which the Ministry of Finance promised in its report this week. Strengthening competition in all market segments (especially in retail) is of utmost importance. Government has recently set up a work group to tackle inflation and making competition more intense is must be one of its key tasks.