Latvian CPI Less Than Forecast, Euro Criteria in Reach

Latvian consumer prices grew less than analysts expected in September, which may have placed the Baltic country’s inflation rate within the euro-adoption criteria for the first time.

The inflation rate advanced to 1.8 percent from 1.7 percent the previous month, the statistics office in Riga said today. The result was below the 1.9 percent median estimate of six economists in a Bloomberg survey. On the month, consumer prices advanced 0.5 percent.

Euro applicants need to keep price growth within 1.5 percentage points of the 12-month average inflation rate of the three EU nations with the lowest rate, according to targets set out in the Maastricht Treaty. The euro-adoption target rate in August was 3 percent. Latvia cut its sales tax by 1 percentage point in July to slow inflation so it can join the euro in 2014.

“If the criteria stays at 3 percent in September, then there’s a pretty good chance that Latvia fulfilled it for the first time,” Lija Strasuna, an economist at Swedbank AB (SWEDA)’s Latvian unit in Riga, said by telephone after the release.

The 12-month average inflation rate “will rise somewhat until the end of the year, due to the base effect and most likely food prices, but still it will be close to 2 percent,” Strasuna said. The harmonized average rate “might be a little above 2 percent in March 2013” when Latvia may apply to adopt the euro, she said.

To contact the reporter on this story: Aaron Eglitis in Riga at aeglitis@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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