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Friday, March 7, 2008

Estonia Consumer Inflation February 2008

Estonia's inflation rate rose in February to what is nearly a 10-year high reaching an annual 11.3 percent - the highest since April 1998 - according to data from the statistics office this morning. The rate was up slightly from January's 11 percent in January, although month on month prices were only up by 0.4 percent, following the hefty hike of 2.2% between December and January.

Really this is the point where all the really important damage is going to be done as far as I can see, and when we will really get to see what a pernicious phenomenon inflation is, as domestic demand contracts and exports are unable to take over the weight due to lack of price competitiveness. The difficulties are only added to by the long term labour supply issue - a product of low fertility and out migration - since wages in the domestic market are - as we can see - proving resistant to any downward adjustment.

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