New inflation data show that average price increases are far from returning to old levels. According to macroeconomist Edin Mujagić, this is the result of central bank policies that started late. ‘They’ve been saying for a long time that it would blow up, but it didn’t. Now we have inflation in slow motion: figures lower than last year, but more stubborn to eliminate”.
Statistics Netherlands (CBS) announced this morning that inflation rose to 8% in February. It’s almost paradoxical, says Mujagić. ‘You can see that energy, which was where most of the inflation came from last year, is no longer contributing to inflation. Indeed, the energy even had an inhibitory effect on the figures.’ Current inflation is mainly due to rising food prices. “The baton has been, so to speak, taken by food, so the inflation numbers will stay high for a while.”
“Get ready for years of significantly higher inflation rates than we are used to,” says Mujagić. “I myself assume somewhere between three and five per cent. No socially disruptive percentage, but double what we are used to with all the consequences that this entails’.
Minimize
All the fault of the central banks, according to Mujagić. ‘De Nederlandsche Bank says that inflation is due to increased demand and supply that cannot satisfy it. This is also true, but they are only sparks. And now they’re falling onto extremely fertile ground for inflation: the money supply.’ The social money supply has doubled since 2008. According to Mujagić, this is the disease that caused inflation and whose symptoms are now mainly treated.
‘Very nice, that half a percentage point, but do you want to tackle inflation head-on? Then there must be a five before the decimal point.’
According to Mujagić, the effect of inflation is downplayed. “Because central banks started intervening too late, people no longer trust them.” And this is reflected: there are more and more strikes for higher wages. “I fear we are now in a wage-price spiral as a result.”
He acted too late
In exactly two weeks, the intention is for the European Central Bank (ECB) to raise the actuarial interest rate by half a percentage point, which would bring the new interest rate to three percent. It is an absolutely necessary measure to curb inflation, believes the ECB. But according to Mujagić it’s not enough: ‘Very nice, that half percentage point, but do you want to tackle inflation head-on? Then there must be a five before the decimal point.’
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.
