Although prices may not continue as quickly as in February, the continuation of inflationary pressures is a major economic risk.
The high price of electricity, food and increased loan interest rates were the main factors of annual inflation. Food and non-alcoholic drinks prices rose by a record 16.3% compared to last year, while monthly inflation was boosted by strong increases in food prices and mortgage interest rates. Appelqvist believes that the slowdown in inflation expected in the coming months is already due to last year’s high price level, which can slow down price increases. However, the economist warns that monthly prices may still rise in many product and service categories, as was seen in February.
Core inflation, which excludes food and energy prices, continued its strong rise and was 6.6% in February. Expensive gasoline, which had accelerated inflation for a long time, no longer affected annual inflation in February, as the price was roughly the same as a year ago. The negative impact of fuel prices on overall inflation is significant in March, as the comparison basis from last year is significantly higher.
According to Appelqvist, in Finland there are no signs of an uncontrollable downward spiral of prices and wages at the same time. However, continued inflationary pressures could lead to a prolonged period of tight monetary policy, which could have serious economic consequences, especially if interest rates continue to rise. Despite expectations for slower inflation in the coming months, large-scale price increases for both goods and services underscore the challenges of remaining stable in the current economic environment.
Source: The Nordic Page