Inflation rises faster than expected

Inflation is gradually starting to pick up from extremely low levels, according to latest data released by the Central Statistics Bureau Monday, reaching 1.2% year-on-year in May.

"Consumer price annual growth in the last three months has gradually gained momentum, yet it still remains modest. While getting out of minuses in March and accelerating somewhat in April, annual inflation in May reached 1.2%, which is even slightly swifter growth than expected," said Swedbank in a note on the data. 

"Average inflation in 2015 might be slightly higher than the April forecast of 0.8%," the bank added.

In annual terms, prices of goods increased slightly (0.4%) while prices of services continued to increase at a moderate rate (3.2%). Housing services continued to be the main driver of annual inflation, backed by more expensive electricity.

In monthly terms prices grew by 0.5% compared to April.

"Consumer prices in Latvia will continue to grow modestly in the forthcoming months. At the end of the year, the growth is likely to become stronger due to the base effect in energy prices. The overall increase in consumer prices this year will still remain relatively low," Swedbank said. 

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