Governments continue to protect citizens against persistent inflation

Despite the most aggressive monetary policy tightening in central bank history and falling energy prices, “persistent inflation” that cannot recover remains a problem. Governments continue to take new measures to mitigate the impact of rising food and energy prices and other costs for citizens.

The prices of food, raw materials, energy and other basic necessities remain high in many countries due to the decrease in problems in the supply chain after the Covid-19 epidemic and the effect of the war between Russia and Ukraine.

Although the global uncertainty increased by the war between Russia and Ukraine has a multidimensional effect, including the global economy and finances, high prices in the energy sector continue to drive up the prices of other goods.

In addition to the war in Ukraine, geopolitical tensions, tight supplies in the food market, persistently high inflation, rising interest rates in response to inflation, tight monetary policy and uncertainty in financial markets are affecting Ukraine. the economy.

After many years of very low inflation rates, persistently high inflation is increasing the cost of living for people in developed and developing economies by the day.

LOW INCOME PEOPLE FACE HIGH FOOD PRICES

While most central banks target inflation below 3 percent to ensure price stability, the inflation rate is still well above the target level despite the bold steps taken by these banks.

Furthermore, while core inflation, calculated excluding food and energy, remains high in many countries around the world, the restrictive monetary policies that came with countries’ response to the inflation challenge also raise concerns of recession in the economy.

Low-income people in particular suffer from inflation and face very high food prices. Employees are demanding higher wage increases in the face of unusually high inflation.

Last month, bankruptcies in the US and Europe and turmoil in the banking sector revealed concerns that countries were tightening monetary policy too much, while the OPEC+ group’s decision to cut oil production by more than 1 million barrels a day from May at the beginning of the week is considered to make it difficult to fight inflation.

Although inflation in some economies has begun to ease slightly from the historical levels reached last year with the fall in energy prices, governments are implementing new measures to mitigate the impact of inflation on citizens.

AMERICAN CONTINENT

Inflation, which reached a peak of 41 years in the middle of last year, in the US, the world’s largest economy, especially due to the increase in energy and food prices, performed in line with expectations with 6 percent per year in February.

Under the “Reducing Inflation Act,” which came into force in August last year, the US administration implemented comprehensive health, weather, and tax regulations to reduce inflation.

In this context, the US will impose sanctions on drug manufacturers that increase their prices above the inflation rate. This will reduce costs for Medicare, the federal health insurance for people age 65 and older, by about $400 per dose.

In February, it was reported that the minimum wage will be increased from 1,302 to 1,320 Brazilian reais starting in May. In December of last year, Congress passed a constitutional amendment that increased the spending ceiling this year to maintain welfare payments to poor families.

Mexico has increased the minimum wage by 20 percent this year. Seeking to diversify its food supply to tame inflation, Mexico opened its doors to imported Brazilian beef products for the first time last month. In Colombia, the minimum wage was increased by 16 percent by 2023.

EUROPE

The European Commission has announced that it will extend the system of maximum gas prices to cover all shopping centers in the European Union from May. EU countries reached an agreement on the upper limit in December last year.

Italy last month approved measures worth some 5 billion euros to reduce the energy bills of families and companies. Rome has allocated more than 21 billion euros in its 2023 budget to alleviate energy costs.

Portugal also announced a package in March to help low-income families, including the abolition of value-added tax on basic food items.

While Greece raised the minimum wage from April 1, this increase was the third increase in the minimum wage since the beginning of last year.

Ireland announced a financing package for domestic assistance in February and temporarily extended the lower VAT rate for the accommodation sector during the summer season.

France reached an agreement with the country’s main supermarket chains last month to help consumers cope with food prices.

Germany planned to spend 14.5 billion euros to finance the electricity price cap until May as part of the aid package launched last year.

Spain has raised the minimum wage by 8 percent since January, while the Czech government raised the minimum wage by 6.8 percent.

ASIA AND AFRICA

In March, India increased the inflation-adjusted allowance for federal government employees by 4 percent.

Japan’s top companies have agreed to make the biggest wage increases in a quarter century, in response to the government’s call for higher wages in March. In the country, the government will allocate more than 2 trillion yen (15.3 billion dollars) of the reserve funds of the current budget to limit inflation.

Last month, Thailand decided to extend the exemption from excise duty on diesel products until July 20.

The Philippines extended its low tariff rates on rice and other food products until the end of 2023 in December last year.

Most public sector unions in South Africa agreed to a 7.5 per cent pay increase after a five-month strike at the end of March.

The Israeli government reached a wage agreement with the main public sector union in early March. With the agreement covering approximately 350,000 public servants, a single subsidy was offered with an 11 percent increase between 2020-2027.

While Turkey’s lowest pension was increased from 5,500 lira to 7,500 lira, the government announced that there would be a provisional increase in the minimum wage in July. (AA)