Thursday, February 2

The spiral is already underway

When the rate Underlying inflation gets ugly, is that the situation is more complicated than it might seem. The year 2021 ended with a general inflation rate of 6.5%, the highest in 30 years. Had it not been for the tax cuts on electricity bills, inflation would have reached 7.3%, according to the INE. Blaming the high rate of prices on the stagger effect compared to a 2020 torn by the pandemic or the rise in volatile elements, such as the Energy, could be used when trying to subtract drama from the data with the argument that “this is going to be transitory.” But when high rates contaminate core inflation, the problem begins to take on a more worrying turn.

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If the most erratic prices of the electricity (the electricity bill rose 72% in 2021 according to the INE) and of unprocessed food, underlying inflation has been climbing steps and is already showing 2.1%. It is a much lower rate than the general rate (6.5%), but it is not a subtle percentage that reveals that the increases in energy and the problems of raw materials are being transferred to the consumer. Inflation “may not be as transitory as it was forecast just a few months ago & rdquor ;, has ended up accepting the vice president of the European Central Bank (ECB), the Spanish Luis de Guindos. The Savings Banks Foundation (Funcas) estimates that underlying inflation will be installed above 2% for most of this 2022.

With this panorama, economists and politicians warn of the risk of an inflation spiral. It appeals to the wage moderation and to avoid transferring inflation to collective bargaining. But second-round effects aren’t just about wages. According to a recent survey by the Bank of Spain, 60% of companies plan to raise prices this year to pass on the increase in costs. When the origin of inflation comes from outside (energy and supplies), the whole country is impoverished, and the responsibility to stop the spiral belongs to some but also to others.