The Bank of Latvia has lowered the average inflation outlook for 2024 to 1.5% as opposed to the 2% suggested in December 2023, as the head of the Latvian central bank’s Monetary Policy Board Uldis Rutkaste on Wednesday, the 27th of March.
He explained that inflation outlook is affected the most by the significantly lower global natural gas prices.
For 2025 the average inflation outlook is lowered to 1.9% as opposed to the 2.3% previously suggested in December. For 2026 the inflation outlook remains unchanged – 1.8%.
Rutkaste explained that in the medium-term inflation will remain influenced by a sustainable wage climb, which stops base inflation or inflation without energy and food prices from dropping as rapidly as general inflation. The rise of labour costs causes risks for the growth of Latvian national economy and sustainability of its competitiveness.
The Bank of Latvia expects that in 2024 base inflation in Latvia to be 4%, 3.6% in 2025 and 2.9% in 2026.
Although inflation is considerably down globally, challenges remain significant – uncertainty remains high and events indicate increased geopolitical tension, said Rutkaste.
In Eurozone inflation and growth of the national economy is expected to be below December’s predictions. Although the Council of the European Central Bank maintains a restricting monetary policy, financial markets predict the turning point is close. This is why financial challenges in Eurozone have already become more beneficial.
Rutkaste added that, despite expectations for lower interest rates, there is a caution observed in the banking sector both in regards to demand and supply.
Also read: European Central Bank may start lowering interest rates this summer
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Bank of Latvia lowers inflation outlook for 2024 to 1.5%
