Latvian inflation jumped 1.9 percent last month to stand 11.4 percent higher than a year earlier, data showed on Monday, as the government drew up plans for budget surpluses in years to come to try to suck money from the overheating economy.
Rapidly rising prices have dashed the plans of Latvia, Estonia and Lithuania for quick entry to the eurozone and raised fears of a hard landing from their rapid growth. Of the three countries, Latvia has shown the greatest imbalances.
The statistics office said in a statement that a month-on-month gain of 1.9 percent was due to price rises in various sectors including clothing and footwear, heating energy, milk and dairy goods.
It took the annual rate to its highest since January 1997. It was the second month in a row that inflation was above 10 percent. August annual inflation was 10.1 percent. "Annual average inflation will not exceed 10 percent this year, but there is a chance it could go above 12 percent on the month at some point before the year is over," said SEB Unibanka chief economist Andris Vilks.
SEB is forecasting 2007 inflation of 9.2 percent, he said. Parex bank analyst Zigurds Vaikulis said inflation could reach 13 percent a year in October when people start paying winter heating bills.