Food prices in Latvian shops are beginning to follow global trends, Mārtiņš Kazāks, President of the Bank of Latvia, said on Monday in an interview with TV3’s programme 900 sekundes.
He noted that in previous years Latvia had seen a pattern whereby food prices rose domestically when global prices increased, but when global food prices fell, prices in Latvia tended to remain unchanged and did not decline.
“Gradually, it appears that prices are finally starting to follow global trends — when prices fall globally, they are also beginning to fall here,” Kazāks said.
He also positively assessed the introduction of the low-price basket initiative in Latvia’s retail sector.
At the same time, Kazāks stressed that the Bank of Latvia could limit food price increases in only one way — by raising interest rates — but that this would not be an appropriate solution in this case.
“Monetary policy can address price increases in only one way — by raising interest rates. But solving structural problems in a single sector by hiking rates and pushing the rest of the economy into recession would be the wrong medicine. Therefore, monetary policy cannot resolve food price increases,” Kazāks said, adding that in this matter the role of the Bank of Latvia is more that of an economic expert.
He also emphasized that consumers themselves play a very significant role in food pricing, as people vote with their wallets through their purchasing choices.
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