OREANDA-NEWS. September 09, 2008. The inflation indices continue to please us already for the fourth month. Yet even more – in August we experienced deflation i.e. when compared with total price amount in July, in August price decline comprised 0.4%, reported the press-centre of Latvijas Krajbanka.

Historically the price decline in Augusts is typical for Latvia, which is related to seasonal factors (e.g. price decline to fruits and vegetables). Only last August was an exception, but this year the tendency remains valid. Together with price fall to separate food products, the deflation was promoted also by the fuel price cut. At the same time the prices to the wide range of goods and services have increased slightly.

Speaking on inflation, the topical question is whether the inflation decline will continue or IS it only a short-time correction. Considering the fall of economic development tempos, a high consumption does not presses prices anymore, like it was not long time ago. Vice verse – the fall of consumption in the country makes the entrepreneurs to implement different price campaigns or even to reduce the mark-up to their goods at all.

It may sound naive – but it is possible that during the next year this could be the reason we experience the deflation not only during summer moths. We have to remember that lowest inflation will be correlated with the rapid decline of economic activity in the country.

At the same time the rise on energy tariffs will not allow prices to decrease as quickly and as steady as we would wish to. Therefore we can experience high inflation indices also in autumn. But the next year we will definitely experience one-digit inflation.