Latvian September Inflation Rate Increases to 11.4%

Oct 8, 2007 - Latvia's annual inflation rate rose to a 10-year high of 11.4 percent in September, led by food and tobacco, pushing the nation further from euro adoption.

The annual inflation rate, the European Union's second highest, rose from 10.1 percent in August, the fourth consecutive gain, the statistical office reported in the capital Riga. In the month, consumer prices rose 1.9 percent. The annual figure exceeded the 10.7 percent median estimate of four economists.

Inflation in the EU's fastest-growing economy is picking up at more than five times the pace of the 13 nations sharing the euro. The government was forced to abandon its 2008 target date for adopting the euro as economic growth pushed consumer prices beyond targets required for the currency switch.

"The trend is quite shocking," said Zigurds Vaikulis, an economist at Parex Asset Management. "We are seeing an inflation spiral. If you add increases in heating and water prices, then inflation could surpass 13 percent next month," Vaikulis said.

The cost of food rose 14.8 percent in the year, alcohol and tobacco prices grew an annual 18.5 percent and restaurants and hotels were 20.1 percent more expensive than a year ago, the statistics office said. Housing, water, electricity and gas expenses grew 16.7 percent on the year.

Euro adoption is limited to countries that meet targets on inflation, budget deficits, debt, interest rates and currency stability. Inflation must be within 1.5 percentage points of the 12-month average rate of the three EU nations with the slowest consumer price growth.

Bulgaria's annual inflation rate was 12 percent in August, the EU's highest.