Martin Lindpere, Eesti Pank, economist
Based on the data of Statistics Estonia, the cost of the Estonian CPI basket fell by 0.3% in November compared with October. Year-on-year, prices have risen by 8%, which is the lowest indicator of this year.
High uncertainty arising from the global financial downturn has caused the inflation trend to shift more quickly. According to preliminary estimates, the euro-area inflation rate slowed to 2.1% in November from 3.2% recorded a month earlier.
In Estonia, inflation is moving more into line with our cooling economy. Motor fuel cheapened 10.3% in November, fully offsetting the 5% price rise of thermal energy. With the cost of fuel dropping, all the prices that have rapidly increased in recent years due to more expensive fuel should be revised. Slowing wage growth and growing uncertainty have put the local consumer on hold. The trend of financing purchases by loans has waned considerably.
The November drop in inflation was broad based, encompassing nearly all important groups of goods. Some services cheapened too. For instance, also supported by seasonal factors, the cost of accommodation was nearly 5% lower in November compared with October. Several housing-related services fell in price as well.
The decline in inflation is in compliance with Eesti Pank's economic forecast and supports the adoption of the euro either in 2011 or 2012. The central bank expects inflation to continue to slow also in the months to come.
