Inflation soars in the Baltics

Surging energy prices pushed prices up across the EU in June, but the three Baltic countries have been hardest hit, according to according to a flash estimate by the EU statistics office Eurostat.

Estonia had the highest inflation rate in the EU in June, at 22%, closely followed by Lithuania on 20.5% and Latvia on 19%. 

Bank of Lithuania Chairman Gediminas Simkus said the European Central Bank (ECB) should consider raising interest rates by half a point – twice the previously mooted level – if the European inflation outlook deteriorates further. 

In recent months, the ECB has been considering its first interest rate hike in over a decade. On current trends, officials need to act “decisively” on inflation, Simkus said.

Across the 19-member Eurozone, inflation reached a 8.6% all-time high in June, outstripping the previous record set in May. The increase is partly connected to Russia’s invasion of Ukraine, according to observers. 

In the whole Eurozone, which includes Austria, Slovakia, Slovenia, as well as Estonia, Latvia and Lithuania, annual inflation is projected to be 8.6% in June 2022, up from 8.1% in May.

Eurostat found that energy is expected to have the highest annual rate in June (41.9%, up from 39.1% in May). Food, alcohol and tobacco is estimated to rise 8.9% year-on-year in June, up 1.4 percentage points from May. 

Non-energy industrial goods are projected to climb 4.3% in the Eurozone in June (compared with 4.2% in May) while services will rise 3.4%, down 0.1 of a percentage point from May.

Simkus expressed hope that the ECB’s new anti-fragmentation tool will not have to be used. Only Germany and The Netherlands saw inflation drop, according to the Eurostat estimate.