Vilnius- Official data released by Statistics Lithuania Tuesday showed that inflation fell in October to 10.5 per cent year- on-year from 11.0 per cent in September, despite a 1.0 per cent rise in prices for consumer goods and services from September to October.

Violeta Klyviene, senior Baltic analyst with Danske Bank, said a slightly larger fall had been expected in Lithuania, the largest of the three Baltic states.

"Looking ahead, we expect inflation to pick up again due to a more pronounced impact from the hike in energy prices in the coming months. We expect the average rate of inflation in Lithuania to remain around 11.4 per cent in 2008," she said.

The expectation is that inflation will continue to be a problem well into 2009, Klyviene added.

However, she said that the installation of a new centre-right government, due to take office on November 17, would help sort out the economy in the longer term.

The new government is working on a stabilization package, which could include a hike in excise duties, the repeal of VAT relief (excluding heating) and even increasing the base VAT tariff, which currently stands at 18 per cent.

"These measures will contribute to rising consumer prices, but the impact will be short-lived. From a purely public finance stance, it would be very welcome," Klyviene said. (dpa)