HICP in Latvia

The Harmonised Index of Consumer Prices (HICP) measures the change in the prices of a representative basket of goods and services bought by Latvian households, under a methodology common to the whole EU. It is produced by the Central Statistical Bureau (CSB).

It is calculated from a regular price survey across a broad sample of outlets and areas, weighting each product by its share of consumption spending. Following Eurostat rules, it is directly comparable with the rest of the EU; monthly and year-on-year changes are published.

Latvia is part of the euro area, so its HICP feeds into the aggregate inflation figure the ECB uses to set interest rates. A hotter-than-expected reading points to price pressures that reinforce tighter monetary policy and reduce households' purchasing power.

It only measures the prices of the defined basket, so it does not capture every good and service in the economy. To gauge the underlying trend, analysts look at core HICP, which strips out energy and unprocessed food, the most volatile components.