Latvia inflation forecast suggests rise above 4% by year-end

Latvia's recent decline in inflation is expected to be temporary. While annual inflation dropped to 2.6% in July, following a 0.7% decrease in average consumer prices compared to June, economists warn of a potential rebound.

Pēteris Strautiņš, chief economist at Luminor, predicts that inflation could rise to approximately 3% in August and exceed 4% by the end of the year. Key risks driving this potential increase include fluctuations in fuel, natural gas, heating, and food prices.

The July price dip was largely driven by a 2% monthly decrease in food and non-alcoholic beverage prices, aided by seasonal factors and a pilot VAT reduction on items such as bread, flour, poultry, and eggs. However, costs for housing, water, electricity, and gas have risen by 6.8% over the year, and service prices continue to grow more rapidly than goods.