Saturday , September 18 2021

Inflation a real “reception of horror”? “It’s like a fire” or “self-fulfilling prophecy”

Inflation in July 2021 was 5%. on an annual basis – the Central Statistical Bureau informed on Friday in the so-called quick respect. The last time we saw such a reading was in May 2011, when prices also increased by 5%. Every year. Higher than current price growth rate – 5.1 percent. – last recorded in August 2001.

High inflation will stay with us longer

First, it is not a one-time peak in inflation. And this can unfortunately mean that high inflation is just starting to stay in our country longer. Of course, the problem does not only apply to Poland, as inflationary trends around the world are beginning to show. However, this is by no means a comforting argument. On the contrary, it is yet another proof that the problem of rising prices will begin to put more and more pressure on us.

– The heads of central banks in the US, Euroland and Poland assure that inflation will return to the target of central banks next year (in Poland it is 2.5 percent plus / minus 1 percentage point). The problem is that bankers have to say that, because if they foresaw longer inflation, they would lead to a spiral known as the self-fulfilling prophecy. Unfortunately, it will be several months before we can say whether our Monetary Policy Council has the right to keep rates at the ultra-low level of 0.1 percent, or perhaps the central banks of Hungary and the Czech Republic, where interest rates are rising – says Piotr Kuczyński for, financial markets analyst.


Inflation like a fire. Not responding can cost us a lot

Economists like to compare inflation with fire. Inflation has the nature of fire. And it can start a fire! (…) There is no action on the part of those responsible for the value of money. This fire has not been extinguished in any way – said prof. Jerzy Hausner, former MPC member.

– If inflation is already on fire, then fighting means that we will destroy the furniture, and perhaps the structure of the house – explained prof. Marek Belka, former President of the National Bank of Poland.

Watch the video
Belka: Inflation will remain permanent here. The risk increases

How come? If the National Bank of Poland and the Monetary Policy Council postpone the moment of responding to inflation, the cost of fighting it could be much greater. Why then, prof. Adam Glapiński and the MPC do nothing about it? It is often said that the fight against inflation can mean the danger of rising unemployment, and moreover it is impossible to fight it locally because it is external.

However, a delayed reaction could be a mistake, because if inflation picks up even more, interest rates will have to rise sharply, which in turn will hurt entrepreneurs and lenders and cause an unwanted, sharp slowdown in the economy. Let us just remember once again that the inflation target of the NBP is 2.5%, and inflation has just reached the level of 5%.

Inflation hits the weakest, like a real “reception of horror”

Inflation affects us all. Electricity, gas, fuel, waste, food bills, everyone in our pockets feels the rising prices. Recently, a popular topic has been the so-called “horror receipts” that Poles exchange on the internet, but in fact, five percent inflation is a real receipt of horror for the poorest.

– Inflation hits the weakest the hardest. Certain social groups that the government would like to favor are in fact approached by this policy. I will repeat again: inflation is a tax imposed by incompetent authorities on the weakest citizens – this is again a quote from prof. Jerzy Hausner in an interview with GW.

How come? Because entrepreneurs and producers will pass on high production costs to the consumer, and ultimately it will hurt most people who earn the least, and the growing bills will eat up their income.

Why is inflation policy and why is it needed by the government?

High inflation can pay off in the short term, for example for the finance minister, as it can melt a mountain of debt. Higher inflation, for example, means higher budget revenues. – I would not even call it a political game, but also a risky economic game. Because inflation, if it could be kept in check by a few percent, not eight percent, but let’s say four percent, four and a half, I suspect it would not have had many negative economic effects. (..) The only problem with inflation is that it is very difficult to determine the moment when it starts to free itself from control – said prof. Marek Belka.

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