‘Prepare for years with high inflation rates’

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The new inflation figures show that average price increases are far from returning to old levels. According to macro-economist Edin Mujagić, this is a result of central bank policies that started late. ‘They have said for a long time that it would blow over, but that is not the case. We now have slow motion inflation: lower figures than last year, but more stubborn to get rid of.’

Statistics Netherlands (CBS) announced this morning that inflation rose to 8 percent in February. It is almost paradoxical, says Mujagić. ‘You can see that energy, where most of the inflation came from last year, is no longer contributing to inflation. In fact, energy even had an inhibiting effect on the figures.’ Current inflation is mainly due to rising food prices. “The baton has, as it were, been taken over by food, so that inflation figures will remain high for a while.”

Food prices in particular are rising, while energy prices are actually lower.
Food prices in particular are rising, while energy prices are actually lower. (ANP / Robin Utrecht)

“Be prepared for years of inflation rates that are significantly higher than we are used to,” says Mujagić. ‘I myself assume a percentage of between three and five percent. No socially disruptive percentages, but double what we are used to with all the consequences that entails.’

Downplay

It’s all the fault of the central banks, according to Mujagić. ‘De Nederlandsche Bank says that the inflation is due to the rising demand and the supply that cannot meet it. That’s all true too, but they’re just sparks. And they now fall on an extremely fertile ground for inflation: the money supply.’ The social money supply has doubled since 2008. According to Mujagić, this is the disease that caused inflation, and the symptoms of which are now mainly being treated.

‘Very cool, that half a percent, but do you want to tackle inflation vigorously? Then there must be a five before the decimal point.’

Edin Mujagic, economist

According to Mujagić, the effect of inflation is downplayed. ‘Because central banks started intervening too late, people no longer trust them.’ And that is reflected: more and more strikes are being made for higher wages. ‘I fear that we are now in a wage-price spiral as a result.’

Acted too late

In exactly two weeks, the intention is that the European Central Bank (ECB) will raise the actuarial interest rate by half a percentage point, which would bring the new interest rate to three percent. It is a much-needed measure to curb inflation, the ECB believes. But according to Mujagić it is not nearly enough: ‘Very cool, that half a percent, but do you want to tackle inflation vigorously? Then there must be a five before the decimal point.’


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