The latest Producer Price Index (PPI) YoY for Latvia, released on November 24, 2025, registered a 1.70% increase. This figure surpasses the market consensus of 1.50% and builds on October’s 1.40% reading, signaling a modest acceleration in producer inflation. The Sigmanomics database confirms this as part of a broader recovery from earlier 2025 lows, including a negative -0.60% in August and a peak of 3.00% in March.

Drivers this month

• Energy prices contributed approximately 0.50 percentage points, reflecting higher global oil and gas costs.
• Intermediate goods inflation added 0.40 percentage points, driven by supply chain normalization.
• Core manufacturing prices rose 0.30 percentage points, supported by steady domestic demand.

Policy pulse

At 1.70%, the PPI remains above the Latvian central bank’s inflation target of 1.50%, suggesting moderate price pressures. The Bank of Latvia is likely to maintain its cautious stance, balancing inflation containment with growth support amid uncertain external conditions.

Market lens

Immediate reaction: EUR/LVL remained stable within 0.10% of pre-release levels, while 2-year government bond yields edged up 3 basis points, reflecting mild inflation concerns but no major market disruption.

Latvia’s PPI trend must be viewed alongside core macroeconomic indicators. GDP growth in Q3 2025 slowed to 1.20% YoY from 1.50% in Q2, reflecting weaker export demand. Unemployment held steady at 6.80%, while consumer price inflation (CPI) stood at 2.30% YoY in October, above the PPI but consistent with moderate inflationary pressures.

Monetary policy & financial conditions

The Bank of Latvia has kept its key policy rate at 2.00% since September 2025, citing inflation risks and external uncertainties. Credit growth remains subdued at 3.50% YoY, with tighter lending standards in place. The financial sector shows resilience but cautious sentiment prevails.

Fiscal policy & government budget

Fiscal consolidation continues, with the government targeting a deficit of 1.80% of GDP in 2025, down from 2.30% in 2024. Public investment focuses on infrastructure and green energy, which may support producer costs in the medium term.

What This Chart Tells Us

Market lens

Immediate reaction: EUR/LVL currency pair showed minimal volatility, while short-term government bond yields rose slightly, indicating cautious investor sentiment amid moderate inflation data.

Looking ahead, the PPI trajectory will depend on several factors, including global commodity prices, supply chain dynamics, and domestic demand. The following scenarios outline potential paths:

Bullish scenario (30% probability)

• Global energy prices stabilize or decline, easing input costs.
• Supply chains fully normalize, reducing intermediate goods inflation.
• Latvian exports recover, supporting producer margins without excessive price hikes.
• PPI growth moderates to 1.00%-1.30% by mid-2026.

Base scenario (50% probability)

• Energy prices remain elevated but stable.
• Supply chain issues persist at a manageable level.
• Domestic demand supports steady price increases.
• PPI holds around 1.50%-1.80% through 2026.

Bearish scenario (20% probability)

• New external shocks (e.g., geopolitical tensions) push commodity prices higher.
• Supply chain disruptions worsen, increasing costs.
• Fiscal tightening dampens growth, but inflation pressures persist.
• PPI accelerates above 2.50%, risking broader inflation spillovers.

Latvia’s November 2025 PPI reading of 1.70% YoY reflects a cautiously optimistic inflation environment. While pressures remain, the data suggests a stabilizing producer price landscape after a turbulent year. Policymakers face a delicate balance between supporting growth and containing inflation amid external uncertainties. Financial markets have so far digested the data without major disruption, but vigilance is warranted given geopolitical risks and evolving global commodity trends.

Structural trends, including ongoing fiscal consolidation and gradual monetary normalization, will shape the medium-term inflation outlook. Businesses and investors should monitor energy markets and supply chain developments closely, as these remain key determinants of producer price dynamics in Latvia.

Key Markets Likely to React to Producer Price Index YoY

The Producer Price Index is a leading indicator for inflation and cost pressures, influencing multiple asset classes. Markets sensitive to inflation expectations and regional economic health are likely to respond. The following symbols historically track or react to Latvia’s PPI movements:

• OMXH25 – Nordic-Baltic equity index sensitive to regional economic shifts and inflation trends.
• EUREUR – Euro currency pairs reflect monetary policy responses to inflation data.
• EURUSD – Euro-dollar exchange rate reacts to inflation surprises and ECB policy outlook.
• BTCUSD – Bitcoin often moves inversely to inflation fears and risk sentiment.
• RYAAY – Airline stocks sensitive to fuel cost inflation, indirectly linked to PPI trends.

FAQs

What is the Producer Price Index YoY for Latvia?

The PPI YoY measures the annual change in prices received by producers in Latvia, reflecting inflation at the production level.

How does the PPI affect monetary policy in Latvia?

Higher PPI readings signal inflationary pressures, influencing the Bank of Latvia’s decisions on interest rates and monetary tightening.

Why is the PPI important for investors?

PPI trends provide early signals of inflation, impacting asset prices, currency values, and investment strategies.

Final takeaway: Latvia’s PPI rise to 1.70% YoY signals moderate inflation persistence, requiring balanced policy responses amid external uncertainties.

This has been drafted with AI assistance and then thoroughly reviewed, refined, and approved by our human editorial team to ensure accuracy, and originality.