At present, expectations of price stability are collapsing rapidly both in Latvia and across the globe – this is very evident in consumer and business sentiment surveys, but it is best seen directly in financial markets, where one can observe the rise in inflation fears hour by hour and minute by minute. The average German inflation expectations for the next two years, as reflected in financial markets, were still below 2% in January, but have now reached 5.56%. The projected average annual rate of price increases in the USA over the next 10 years has reached 2.8%, compared with 1.8% at the turn of the year. Expectations for average inflation over the next 10 years are almost exactly the same – this is the highest level this century. Such forecasts are not available for Latvia as our financial markets are not as developed, but it can be assumed that in our country, the price increase will be approximately one percentage point higher than in Germany.

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