Latvia's Ministry of Finance has published an assessment showing that falling food prices kept annual inflation near 3% in October despite pressure from higher fuel costs. Consumer prices rose 3.1% from a year earlier and 0.4% from September. Inflation has not accelerated in recent months, unlike in the euro area, where the October flash estimate reached 4.0%.
Fuel price increases accounted for 45% of Latvia's annual inflation in October. Food prices, by contrast, fell 5.4% from a year earlier, subtracting 1.1 percentage points from inflation. The decline extended across almost all food categories, rather than only those benefiting from the reduced value-added tax rate introduced on July 1. Fuel excise duty cuts effective Oct. 1 initially lowered pump prices, but subsequent increases in oil prices offset that effect, leaving average monthly fuel prices broadly unchanged from September.
Annual inflation is expected to remain around 3% in November before likely accelerating from December. Food prices are expected to continue falling in annual terms through the remainder of 2026, but could rise in 2027 as sustained high oil and gas prices increase production, processing and transport costs. Brent crude's decline to USD 89 per barrel by the end of the first 10 days of November could ease fuel price pressure. However, continuing military confrontation in the Persian Gulf and the absence of a ceasefire leave a high risk of renewed oil price increases.