Inflation on the rise in Finland: a long battle to tame prices ahead, warns chief economist

While prices may not continue to rise as rapidly as in February, the persistence of inflationary pressures is a major economic risk.

The high cost of electricity, food, and increased loan interest rates were the main drivers of inflation on an annual basis. The price of food and non-alcoholic beverages increased by a record-breaking 16.3% compared to last year, while monthly inflation was boosted by the sharp rise in food prices and mortgage interest rates. Appelqvist believes that the expected slowdown in inflation in the coming months is due to the already-high price level from last year, which could slow the pace of price increases. However, the economist warns that monthly prices could still rise in many product and service categories, as seen in February.

The core inflation rate, which excludes food and energy prices, continued to rise sharply and reached 6.6% in February. Expensive gasoline, which has driven up inflation for a long time, no longer had an impact on the annual inflation rate in February, as the price was roughly the same as a year ago. The negative impact of fuel prices on overall inflation will be significant in March as the comparison base from last year is much higher.

Appelqvist says that there are no signs of an uncontrollable spiral of prices and wages falling at the same time in Finland. However, the persisting inflationary pressures could lead to a prolonged period of tight monetary policy, which could have serious economic implications, particularly if interest rates continue to rise. Despite expectations of slower inflation in the coming months, the wide-ranging price increases in both goods and services highlight the challenges of maintaining stable inflation levels in the current economic environment.

HT