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Economy in Brief

Inflation in Eastern Europe
by Louise Curley May 12, 2008

Four Eastern European countries--the Czech Republic, Romania, Latvia and Lithuania--reported inflation rates for April today. Inflation rates are shown in the first chart. In April inflation ranged from a low of 6.8% for the Czech Republic to a high of 17.4% in Latvia. Lithuania, the other Baltic state reporting today, also reported a high rate of inflation, 11.7%, while inflation in Romania came in at 8.6%. Inflation in these countries began to take off in early 2007, as in so many other countries, with the rises in the prices of food and oil.

Latvia and Lithuania have kept their policy interest rate unchanged while the Czech Republic and Romania have increased them. However, all four countries have negative interest rates as shown in the second and third charts.

Only the Czech Republic has experienced an appreciation of its currency relative to the Euro that has been a major factor in keeping its inflation relatively subdued. Latvia and Lithuania have tied their currencies to the Euro and Romania has recently seen its currency depreciate. The Euro exchange rates of the four countries are shown in the fourth chart.


 INFLATION (%) Apr 08 Mar  08  Feb 08 Jan 08  Apr 07  2007 2006 2005
Czech Republic 6.8 7.1 7.5 7.5 2.5 2.8 2.5 1.9
Romania 8.6 8.6 8.0 7.3 3.8 4.8 6.6 9.0
Latvia 17.5 16.8 16.7 15.8 8.9 10.1 6.5 6.5
Lithuania 11.7 11.3 10.8 9.9 4.8 5.7 3.7 2.7
 POLICY INTEREST RATE May  08 
Czech Republic 3.75 -- -- -- -- -- -- --
Romania 9.75 -- -- -- -- -- -- --
Latvia 6.0 -- -- -- -- -- -- --
Lithuania 5.0 -- -- -- -- -- -- --
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