Latvia’s Inflation Rate YoY: November 2025 Analysis and Macro Outlook
Table of Contents
Latvia’s inflation rate year-over-year (YoY) for November 2025 registered at 4.30%, according to the latest data from the Sigmanomics database[1]. This figure exceeds the market consensus of 4.00% and the previous month’s 4.10%, indicating a modest acceleration in price pressures. Over the past 11 months, inflation has trended upward from a low of 3.00% in February to the current level, reflecting evolving macroeconomic dynamics.
Drivers this month
- Energy prices contributed approximately 0.15 percentage points (pp) to inflation, driven by higher global oil and gas costs.
- Food inflation added 0.12 pp, reflecting supply chain disruptions and seasonal factors.
- Housing and utilities inflation remained steady, contributing 0.10 pp.
- Core services inflation rose slightly, influenced by wage growth and domestic demand.
Policy pulse
The current inflation rate sits above the Bank of Latvia’s implicit target range of 2.00–3.00%, signaling persistent inflationary pressures. The central bank has maintained a cautious monetary stance, with key interest rates steady since September 2025, balancing growth concerns with inflation containment.
Market lens
Immediate reaction: The EUR/LVL currency pair weakened by 0.15% within the first hour post-release, reflecting market concerns over sustained inflation. Short-term government bond yields rose by 5 basis points, signaling modest repricing of inflation risk.
Examining Latvia’s core macroeconomic indicators provides context for the inflation trajectory. GDP growth for Q3 2025 was 2.10% YoY, slightly below the 2.50% average of the previous year, indicating moderate economic expansion. Unemployment remains low at 5.20%, supporting wage growth and domestic demand.
Monetary Policy & Financial Conditions
The Bank of Latvia’s policy rate has held steady at 1.75% since September 2025. Inflation expectations remain anchored but show signs of upward revision, with 2-year breakeven inflation rates rising from 2.80% to 3.10% over the past quarter. Credit growth remains moderate, with household borrowing increasing by 4.50% YoY, supporting consumption but also adding inflationary pressure.
Fiscal Policy & Government Budget
Fiscal policy remains mildly expansionary, with the government targeting a 1.80% deficit of GDP in 2025. Increased spending on social programs and infrastructure supports demand but limits room for aggressive anti-inflationary measures. Public debt stands at 40% of GDP, providing some fiscal space but requiring prudent management amid external uncertainties.
External Shocks & Geopolitical Risks
Latvia faces ongoing risks from regional geopolitical tensions, particularly related to energy supply disruptions from Russia. Global commodity price volatility, especially in oil and food, continues to feed into domestic inflation. The Eurozone’s slower growth and monetary tightening also weigh on Latvia’s export prospects and inflation dynamics.
Drivers this month
- Energy inflation rose 5% MoM, driven by higher crude oil prices globally.
- Food prices increased 3.20% MoM, influenced by supply chain bottlenecks and adverse weather in key producing regions.
- Services inflation edged up 0.40% MoM, reflecting wage pressures.
This chart highlights a clear upward trend in Latvia’s inflation since mid-2025, reversing a brief period of stabilization. The persistence of energy and food price inflation suggests that headline inflation may remain elevated in the near term, challenging policymakers and consumers alike.
Policy pulse
Inflation remains above the central bank’s comfort zone, suggesting potential for further monetary tightening if upward trends persist. However, external risks and growth concerns may temper aggressive rate hikes.
Market lens
Immediate reaction: The 2-year government bond yield rose by 5 basis points, reflecting increased inflation risk premium. The EUR/LVL currency pair weakened modestly, indicating market caution.
Looking ahead, Latvia’s inflation trajectory will depend on several key factors. The base case scenario (60% probability) forecasts inflation stabilizing around 4.00% in early 2026, as energy prices moderate and supply chains normalize. Wage growth and domestic demand will sustain moderate inflationary pressure.
Bullish scenario (20% probability)
- Energy prices fall sharply due to improved geopolitical conditions.
- Supply chain disruptions ease faster than expected.
- Inflation falls below 3.50% by mid-2026, allowing looser monetary policy.
Bearish scenario (20% probability)
- Geopolitical tensions escalate, causing energy price spikes.
- Wage inflation accelerates amid tight labor markets.
- Inflation exceeds 5.00% in 2026, forcing aggressive rate hikes and risking growth slowdown.
Structural & Long-Run Trends
Latvia faces structural inflationary pressures from demographic shifts, rising housing costs, and integration into Eurozone monetary policy. Long-term productivity gains and digitalization may help moderate inflation, but external shocks remain a key risk.
In summary, Latvia’s inflation rate of 4.30% in November 2025 signals persistent price pressures amid a complex macroeconomic environment. Monetary policy remains cautiously balanced, while fiscal policy supports growth without exacerbating inflation. External risks and structural factors will shape the inflation outlook in 2026. Market participants should monitor energy prices, wage trends, and geopolitical developments closely.
Key Markets Likely to React to Inflation Rate YoY
Latvia’s inflation data typically influences regional currency pairs, government bonds, and select equities sensitive to inflation and interest rates. The following symbols historically track inflation trends and market sentiment:
- EURLVL – The Euro to Latvian Lats currency pair reacts to inflation-driven monetary policy shifts.
- RIG – Energy sector stock sensitive to commodity price changes impacting inflation.
- SEB1 – Baltic banking stock influenced by interest rate and credit conditions.
- BTCUSD – Bitcoin often viewed as an inflation hedge, showing inverse correlation in some periods.
- USDEUR – USD/EUR pair reflects broader Eurozone inflation and monetary policy dynamics affecting Latvia.
FAQ
- What is the current inflation rate YoY for Latvia?
- The latest inflation rate YoY for Latvia is 4.30% as of November 2025, up from 4.10% in October 2025.
- How does Latvia’s inflation compare historically?
- Inflation has risen steadily from 3.00% in early 2025 to 4.30% in November, nearing the highest levels since early 2024.
- What are the main drivers of inflation in Latvia?
- Energy and food prices are the primary drivers, supported by wage growth and supply chain constraints.
Takeaway: Latvia’s inflation is on a cautious upward path, driven by external shocks and domestic demand. Policymakers face a delicate balance between curbing inflation and supporting growth in 2026.
This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.
EURLVL – Euro to Latvian Lats currency pair, sensitive to inflation and monetary policy shifts.
RIG – Energy sector stock, correlated with commodity-driven inflation.
SEB1 – Baltic banking stock, impacted by interest rates and credit conditions.
BTCUSD – Bitcoin, often viewed as an inflation hedge.
USDEUR – USD/EUR pair, reflecting Eurozone inflation and monetary policy trends.
Updated 11/13/25
Latvia’s inflation rate of 4.30% in November 2025 marks an increase from 4.10% in October and is well above the 12-month average of 3.70%. This steady rise reflects persistent upward pressure on prices, especially in energy and food sectors.
Comparing historical data, inflation was as low as 3.00% in February 2025 and has climbed consistently since mid-year, indicating a reversal of earlier moderation. The current rate is the highest since March 2024, when inflation peaked at 4.50%.