Big Bank chief economist: First signs of Middle East crisis reaching Estonian prices

The consumer price index published by Statistics Estonia on Friday shows that price growth is accelerating again. Big Bank's chief economist Raul Eamets warns that the first effects of the Middle East crisis are already visible in Estonia's inflation figures.

Statistics Estonia released the consumer price index on Friday, 5 June, which rose more slowly than the preliminary estimate of the harmonised consumer price index published earlier in the week. Nevertheless, the figures show a clear trend — price growth in Estonia is accelerating again.

Big Bank's chief economist Raul Eamets believes that while the statistics may appear moderate at first glance, there is no reason for optimism. Eamets notes that the first consequences of the Middle East crisis are already visible in Estonia's price picture, and further geopolitical developments may put additional pressure on inflation.

Energy price volatility is one of the main factors putting pressure on inflation in the context of Middle East tensions. The more difficult situation on global oil markets inevitably carries over to fuel prices and from there to transport and food commodity prices.

For the Estonian economy, accelerating inflation means additional pressure on both consumer purchasing power and the cost base of businesses. Eamets emphasises that in a situation where wage growth is trying to keep pace with inflation, it is important to monitor whether price increases remain a temporary phenomenon or become a persistent trend.