Inflation no more rising, food prices higher

With prices increasing 25 percent in one year, vegetable oils entered the top 10 inflation rates. At the moment, energy products still dominate this classification, with natural gas taking the lead. That fuel has become 140 percent more expensive in one year, according to April inflation figures from Belgium’s Statistical Office Statbel on Thursday. The overall price level rose by 8.3 percent, the same level as last month.

While the contribution of energy products to general inflation in April decreased, the contribution of food products increased. This indicates that the character of inflation is slowly but surely changing. The rising costs of transportation, heating and energy are increasingly affecting the broader economy. The fact that the prices of some foodstuffs are rising faster than the prices of other products and services has to do with the war in Ukraine. This country is an important producer of grain and sunflower oil. Uncertainty about exports from Ukraine has led to higher prices for these and related goods all over the world. This is the reason for high prices for bread (+10%), pasta and couscous (+12%) and breakfast cereals (+9%). But the prices of food products whose availability was not affected by the war also rose sharply: fresh fish by 10 percent, milk by 9 percent, eggs by 7 percent, butter by 14 percent, coffee by 12 percent, and mineral water by 7 percent. cent. The inflation rate for all food products combined was 5.09%. In March, the rate was 4.63 percent.

Inflation remains an ongoing problem elsewhere in Europe. In Spain, the figure fell from 9.8 to 8.4 percent. In Germany there was a slight increase. In April, the figure was 7.4 percent, according to a preliminary estimate, compared to 7.3 percent in March. It was the highest level since October 1981.

“The downturn is not in sight yet,” said Karsten Brzeski, an economist at ING. On the contrary, inflationary pressures are widening. As in Belgium, the focus in Germany is slowly shifting from energy to food. In some states, food prices have already risen by more than 10 percent. This hurts German consumers even more, because wages and benefits do not correlate with inflation. This is the case in Belgium. Brzeski takes into account that German inflation will exceed 10 percent next summer, and that the average for 2022 will be 8 percent.

raise interest rates

Continued high inflation is increasing pressure on the European Central Bank to end its support program and start raising interest rates. The bond buying program will almost certainly end after June. After that, the way is open to raise interest rates. The pace of this will depend on two things: inflation and growth. Raising the interest rate is not a panacea. Central banks have no influence on energy prices.

However, more and more central banks are raising interest rates. Yesterday, Sweden’s central bank decided to raise interest rates from 0.00 to 0.25%. It’s a noticeable shift. Until recently, Riksbank believed that raising interest rates would not be necessary for the time being. Rampant inflation (6.1 per cent in March) has led Swedish bankers to change their minds. The Riksbank acknowledges that a rate hike will not change energy prices. However, it may be possible to prevent inflation from stabilizing in the economy through price and wage formation.

Luis de Guindos, Vice President of the European Central Bank, said yesterday that inflation is “close” to the peak, and that price increases will be less visible in the second half.

To ensure purchasing power, we have an automatic wage index in Belgium. But is this always good news? Economic journalist Stijn De Cock makes a statement with confidence in the video below.