In February 2015, consumer prices fell by 1 percent compared to the same period of the previous year. Low inflation has a number of positive effects: wages and pension benefits increase in real terms and thus households’ disposable income rises, and these factors fuel consumption and boost the economy.

Declining inflation helps low-income families to the largest extent, as they spend the largest share of income on consumption. Subdued prices create a more predictable economic environment for enterprises. Muted inflation facilitates lower yields, and it assists enterprises in the financing of new investment projects and these eventually also improve economic performance.

Inflation has been in negative territory for the past half a year, but the pace of price decline has decelerated. Due to rebounding domestic demand, inflation may pick up in 2015, but disinflationary effects within Europe are set to continue to dampen price rises.

(Ministry for National Economy)