In 2022, commodity prices began to rise much faster than usual, resulting in over double-digit inflation.
This is a phenomenon that occurs worldwide. Although there were slight improvements, Neither the United States nor Europe is in a position to force prices to move toward moderation.
In Spain, the first half of the year was positive in terms of inflation. Although food prices continue to rise, Inflation is declining. But in August there was a turnaround.
The annual rate of variation in the CPI was last month August by 2.6%, three tenths above the July value. Circumstances such as the increase in staple foods and fuel have led to this pushed Inflation is rising again.
Taking into account the latest studies of the Bank of Spain (BdE), la Inflation will be above expected this year and that could also happen in 2024.
The BdE is correcting its forecasts upwards
A significant drop in food prices is not expected in the short term. In fact, some, such as olive oil, will continue to rise due to increased production costs and drought resulting in much smaller harvests.
A reduction in fuel prices is also not expected. Major producers such as Saudi Arabia and Russia have reduced their production This creates tension in the market and increases prices week after week. The barrel of Brent is now 28% more expensive than before the start of the summer season, and the situation could last for months.
All this has led the Bank of Spain to revise upward its inflation forecasts for 2023 and 2024.
This year, consumer price increases were expected to remain at an average of 3.2%, but after the review The number has risen to 3.6%..
The inflationary forecasts for energy prices will have an impact until 2024. Since the energy support measures in force since 2021 will no longer apply, Inflation could rise to 4.3%. That is seven tenths more than the inflation that the BdE had forecast for Spain in 2024.
To achieve the European goal of inflation below 2%, we would have to wait until 2025. By then, the Bank of Spain expects a consumer price index of 1.7%.
An inflation “too high for too long”
Margarita Delgado, deputy governor of the Bank of Spain, explained this “Inflation continues to fall, but is expected to remain too high for too long.”. An argument that the European Central Bank (ECB) also advocates.
When the ECB announced a new interest rate hike last week, it hinted that it could be the last. But that was also mentioned These high rates had to be maintained over a longer period of time to be truly effective.
In less than a year, interest rates in Europe have reached their largest increase in history. Nonetheless, Inflation in the Eurozone remains at around 5% very far from the 2% that the ECB has set as a target.
If normal inflation is slowly falling, core inflation, which should definitely be below 2%, is moving even more slowly. This leads experts to believe that recovery is still a long way off.