Friday, July 6, 2007

Inflation in Estonia

This in Bloomberg today:

Estonian June Inflation Rate Rises to Near Six-Year High

July 6 (Bloomberg) -- Estonia's inflation rate rose in June to a near six-year high as prices of transportation and food advanced, raising concern the Baltic economy is overheating.

The annual inflation rate increased to 5.8 percent, the highest since August 2001, from 5.7 percent in May, the statistics office said on its Web site today. Monthly price growth slowed to 0.5 percent from 0.7 percent in May.

Standard & Poor's Ratings Services lowered Estonia's outlook to negative from stable this week, citing a higher risk ``hard landing'' for the Baltic economy because of a wide current-account deficit and accelerating inflation.

Estonians have boosted spending on housing, food and cars as unemployment has dropped to a 15-year low and wages have risen an annual 20 percent in the first quarter, keeping inflation at levels above those needed for euro adoption.

The cabinet of Prime Minister Andrus Ansip last week cut budget surplus targets in 2008-2011 to 0.5 percent of gross domestic product from 1.5 percent. Controlling government spending is among the few tools available to Estonia to control price rises as the local currency, the kroon, is pegged to the euro in the exchange-rate mechanism.

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