OREANDA-NEWS. May 11, 2011. According to the consumer price index of Statistics Estonia, the cost of the consumer basket went up by 0.7% in April and was 5.4% higher year-on-year, reported the press-centre of Eesti Pank.

The broad-based price increase of food continues to be the main inflation driver. This partly reflects the pass-through of the commodity price hike in the global market, but also possible problems with the functioning of the market. Compared to March, the price of edible oil and sugar increased by more than 15%.

Looking ahead, it is important that the one-off commodity price increases would not raise inflation expectations and pass through to wages. Wages should not grow faster than productivity, since that would damage the competitiveness of Estonia's enterprises. 14% of the labour force (that is, those people who wish to work) is unemployed and general wage growth would impede the resumption of employment.

In order to reduce the second-round effects of inflation and to ensure medium-term price stability, the Governing Council of the European Central Bank, which also includes the Governor of Eesti Pank, increased interest rates by 0.25% in April.