Currently the price rise is more rapid than can be justified with influence from the war in Ukraine, said the governor of the Bank of Latvia Mārtiņš Kazāks in an interview to TV3 programme 900 seconds on Tuesday, 21st of March. He added that the inflation dynamic shows signs of shamelessness.
«Both in Eurozone and Latvia inflation at the moment is no longer largely caused by war,» said Kazāks, adding that inflation caused by the war was the first wave, which caused a surge of prices on energy resources. But energy prices have since gone down and stabilised.
This means inflation should go down more rapidly, but it’s not going down.
The governor of Latvia’s central bank explained that the consumer price rise is not going down as rapidly, because inflation from energy resources has long since passed over to other sectors.
«We can see prices are going up more rapidly than can be justified with the consequences from the war. I would even say that in the current inflation dynamic I would even say that in the current inflation dynamic we can see signs of shamelessness – prices are being increased simply because they can be,» stressed Kazāks.
He also mentioned that corporate profit margin is relatively high at the moment, but it shouldn’t be in a time when the economy is not in a state of growth. «This are a second stage effects – inflation is starting to take root,» added Kazāks.
«Be careful and be more selective – if you see prices go up, look around; maybe competitors’ prices are lower.
Buy goods somewhere else and don’t let prices go up,» said the governor of the Bank of Latvia, adding that annual inflation is going down, but the drop rate should be faster.
He also said that to make sure inflation does not take root, because high and lasting inflation is very bad for the economy, rates are increased in the monetary policy area, slowing the economy, reducing demand and preventing prices from going up.
According to Kazāks, Latvia’s annual inflation may drop to a single digit at the end of the year.
Also read: Eurostat: Latvia’s inflation higher than average in EU and Eurozone in February