(Image Source: La Presse)
The ECB wants to raise rates: what are the risks?
Is it better to die of hunger or thirst? It is a similar dilemma that Europe is facing. On the one hand, in fact, there is an increase in pricesa blaze that does not seem to fade – even if those who do not have a short memory will not be able to forget how Christine Lagarde had defined “passenger” the phenomenon – over time. On the other hand, there is the fear that we are heading towards a very difficult period from an economic point of view, with companies that risk closing due to expensive energy, political instability and the concrete possibility that growth forecasts need to be revised. to the downside. To stem this phenomenon it seems obvious and necessary to proceed with an increase in interest rates. And the “hawks” of Northern Europe would like an increase of 75 basis points, or 0.75% after the 0.5% of last July. Currently in Italy, according to Istat data, we have inflation – excluding energy goods – 3.9%. On an annual basis, both the prices of goods (from + 9.7% to + 11.4%) and those of services (from + 3.1% to + 3.4%) accelerate; therefore, the negative inflation differential between the latter and the prices of goods widens (from -6.6 in May to -8.0 percentage points). The prices of food, household and personal care products accelerate (from + 6.7% to + 8.3%) and those of high-frequency purchasing products (from + 6.7% to + 8.4%).
Question: what does it mean? In the meantime, an answer to try to calm people down. It is not the first time that Italy finds itself in this situation. In the period between 1973 and 1985, inflation averaged 15.2%, peaking at 21.2%. The reason is that, at the time, wages had been indexed to inflation by means of the sliding scale mechanism, the operation of which can be easily summarized: the monthly sum necessary for the typical family was ascertained and made equal on a 100 basis, in reference to a given period for the purchase of the products in the basket, the subsequent percentage changes in the prices of consumer goods became the points of variation of the index of the cost of life, to which wages were directly adjusted. D.in 1992 the escalator no longer exists, despite periodically trying to reintroduce it. This is because the correlation between rising prices and rising wages led to a spiral in which the devaluation of money became virtual. Just think that in the period we were talking about if a good cost 100 in 1972 was worth over 626 in 1986. Now inflation is scary again, and we need to intervene.
Read also:
Energy, the Confindustria alarm: “Bills increased tenfold”
Gas, the EU studies the price-cap hypothesis: prices fall below 255 euros
Dompé: “The production of some drugs for expensive energy at risk”
Pd, Cacciari: “Letta made a mistake twice, he goes home after the elections”
Pnrr, Draghi spurs ministries: “Target 121 measures in September”
Expensive-energy: now it also costs more to drink wine, beer, water, juices and soft drinks
Sixteen-year-old Sara Bejlek wins the game, too affectionate celebration?
Generali acquired the joint ventures of AXA and Affin in Malaysia
CDP, Abi and the Ministry: new incentives for tourism companies are underway
Generali, photos of SDG number 1 ‘Fight against poverty’ presented
#ECB #hawks #shock #rate #hike #risks #enormous