Latvia's Ministry of Finance published an inflation update reporting that consumer prices rose 3.5% year on year in December 2025, with average inflation of 3.7% across 2025. Prices increased for both goods and services, up 2.7% and 5.7% respectively, with food prices identified as the main driver. Food and non-alcoholic beverages rose 4.2% year on year in December, while the 2025 increase for this category was 6.2%, contributing 1.6 percentage points to inflation. The ministry expects food price growth to slow in 2026, supported by declining global unprocessed food prices and a cut in value added tax from 21% to 12% for certain basic foods from July, but notes offsetting pressures from labour costs and utilities, including year-on-year increases in December of 13.5% for heat energy and 10.3% for water supply services. Gas and oil prices trended down in 2025, with Brent falling to USD 60 per barrel in December, and gas tariffs could decline in early 2026, while any reductions in heat energy tariffs may only affect the next heating season. Fuel was 2.1% cheaper on average in 2025 than in 2024, with average prices of EUR 1.514 per litre for diesel and EUR 1.538 for 95-octane gasoline; higher excise duty from 1 January is expected to add around EUR 0.03 per litre, although average 2026 fuel prices are projected to be broadly similar to 2025. The inflation outlook also incorporates higher excise duty rates from January for tobacco products and natural gas, an increase in the natural resources tax, and a further excise duty increase for alcoholic beverages from 1 March. Inflation is expected to remain above 3% in early 2026 and moderate to below 3% in spring.

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