Deflation can discourage consumption as consumers delay purchases in anticipation of lower prices. Photo: Heikki Saukkomaa / Lehtikuva
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Finland’s inflation rate dropped to 0.2 percent in July, marking one of the slowest increases in consumer prices in recent years.
Statistics Finland confirmed the year-on-year figure on Thursday, adding that the monthly increase from June to July also stood at 0.2 percent. The slowdown follows a sharp peak in inflation during 2023 and early 2024.
Rising prices for coffee, general hospital fees and wireless telephone services were offset by falling electricity prices, lower average interest rates on housing loans and reduced consumer credit costs.
The Harmonised Index of Consumer Prices (HICP), which excludes categories such as owner-occupied housing and interest rates, also measured inflation at 2 percent, equal to the eurozone average.
Economists have warned that the current price trend could signal the onset of deflation, defined as a sustained decline in the general price level.
“On the surface, price stability supports purchasing power,” said Patrizio Lainà, Chief Economist at STTK. “But if price growth halts or reverses, the risk to the economy increases rapidly.”
Lainà highlighted the danger of debt deflation, a scenario in which falling prices increase the real burden of household debt. “When prices fall and wages do not rise, the weight of mortgage debt grows heavier,” he said.
Juho Keskinen, Chief Economist at the Mortgage Society of Finland, said the inflation figure is approaching negative territory. “Falling interest rates are putting further downward pressure on inflation. We are now close to entering deflation,” he said.
Deflation can discourage consumption and investment, as consumers delay purchases in anticipation of lower prices. For mortgage holders, it could transform low interest rates from a benefit into a
Source: www.helsinkitimes.fi
