Finland inflation rises to 1.3% in March

Inflation in Finland rose in March as higher energy prices pushed up consumer costs, while the central bank warned that the illegal US-Israeli war in against Iran is set to increase inflation across the euro area and slow economic growth.

Statistics Finland said consumer prices increased by 1.3 per cent year on year in March, up from 0.6 per cent in February. Prices rose by 0.7 per cent compared with the previous month.

Electricity, diesel and petrol recorded the largest price increases during the period.

Lower interest rates on housing loans and consumer credit helped offset the rise.

Core inflation, which excludes food and energy, stood at 0.2 per cent.

Measured under the EU-harmonised index, inflation in Finland reached 2.5 per cent in March, in line with the euro area estimate. The figure also rose from 1.9 per cent in February.

The Bank of Finland said geopolitical tensions are shaping the economic outlook. The conflict in the Middle East has disrupted energy markets and increased costs for businesses and households across Europe.

Olli Rehn, governor of the Bank of Finland, said inflation is expected to rise this year. “We are closely monitoring the development of the conflict and its economic effects. No interest rate decisions are predetermined,” he said.

The central bank said damage to energy infrastructure will have lasting effects even after the most acute phase of the conflict ends.

Higher energy costs continue to weigh on European industry, which remains more dependent on imported fossil fuels than the United States. The bank said this exposes the euro area to external shocks and weakens competitiveness.

Households across the euro area have also increased savings, reflecting uncertainty and higher interest rates in recent years. This has limited growth in private consumption.

Rehn said the green transition in energy production is key to reducing exposure to future shocks. He noted that Finland has progressed faster than many countries in shifting away from fossil fuels, which helps limit the impact on its economy.

HT