Excise duty hike, higher oil prices boost CPI inflation in Estonia

The hike of the fuel excise duty hike and the higher oil prices boosted CPI inflation, analysts from the central bank, the finance ministry and Swedbank commented after the publishing of the CPI data for January, which showed that consumer price growth edged up to 3.5% y/y from 3.4% y/y in December. Moreover, the raise of the excise duty on tobacco and the higher electricity price on Nordic electricity exchange exerted some upward pressure on prices.

Central bank economist Sulev Pert estimated that the excise duty hikes boosted y/y inflation by 0.9pps. He noted that there was some decline of prices of butter and some other dairy products. The euro appreciation offset some of the impact of from the oil price increase. Pert noted that 80% of fuels, 19% of machinery and equipment and 17% of clothing are imported in USD. In recent months CPI inflation was boosted by inflation projections and consumer’ expectations, which were boosted by the growth of prices of essential goods, Pert noted. Meanwhile, FinMin analyst Kristijan Pungas commented that the January inflation is in line with FinMin’s September projection. If oil prices do not register change, CPI inflation should ease to 3% y/y in February due to higher base from Feb 2017, he said. Pungar also noted that CPI growth should slow down this year because of lower contribution of external factors. At the same time, Swedbank economist Liis Elmik commented that this year’s inflation should be driven by rising prices of food, alcohol and tobacco.

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