Inflation is coming down, but food prices are going up. The Netherlands is experiencing what economist Edin Mujagic calls “slow-motion inflation”. “The headline inflation rate is coming down because energy prices are coming down, but you’re going to see inflation in more areas, it’s going to be in more and more goods and services.”
“We are in an environment where inflation is decreasing month by month,” says the economist. ‘I wouldn’t be surprised if Dutch Statistics told us later in the year that inflation had been zero per cent at one point. This is mainly because the huge energy angle effect has now disappeared.’
Two uncertainties
It’s the first time in a long time that energy has no influence on inflation, so the year-on-year effect you get will clearly play a role from now on.’ Energy That Depresses Inflation: How Long Can and Will Governments Continue This Policy? According to Mujagic, two uncertainties become more apparent as we approach the end of the year: What will oil, gas and electricity prices do by then? (which depends on how cold the winter is). And what will the government do with the price cap? ‘The start of this will have a favorable effect on the inflation rate from January onwards. If you don’t continue like this and gas and electricity prices start to rise, in 2024 you will have the opposite effect”.
Linguistic magic
Finally, Mujagic looks ahead to the interest rate decision that the US central bank, the Fed, will make tonight. Or to be more precise: at the next press conference. Because for Mujagic the Fed chairman faces a ‘linguistic challenge’. After all, Powell has to admit that things are also moving in the right direction in terms of inflation in the US, but he shouldn’t overdo it, Mujagic thinks. “Because then the market will think it will quickly stop raising interest rates. The market will then celebrate, undoing some of the preliminary work done by the Fed. Powell has to walk a fine line, but if anyone can do it, Mujagic thinks it’s him.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
