THE inflation In October it is located in the 1.8% over one year, accelerating by 3 tenths, according to the October CPI leading indicator. The underlying is also located in the 2.5% over one year, accelerating by a tenth, still with downward resistance, and the Harmonized CPI with the EU at 1.8% over one year, which is consistent with the rest of the EU and on which the ECB as a price indicator. Monthly, the CPI increases 0.6% and the underlying 0.4%.
The most serious thing is that these inflation growth rates, although to slow down Its increase occurs on very high price levels reached in previous months, which continues to reduce the purchasing power economic agents.
Remember that many products have seen their prices increase exponentially: thus, above already very high levels, in September (the last available with this level of disaggregation) the price of foodstuffs increased by 3.1% Year ; pork, a 2.7%; oils, a 28.8%, increasing exponentially for several months; dairy products, a 0.5%, on already significant increases compared to previous months; potatoes, one 4.7%, with an acceleration from year to year; the fish, a 23%; sugar, a 3.6%. All this, in addition to the already very significant accumulated increases in recent months.
All this means that since he ruled Sanchez inflation has increased 19.24%, while the underlying, during his tenure, did so 17.59%.
This control of inflation comes very late and has been short-lived, as it is accelerating again because inflation has been falling for so many months. disposable income to economic agents, who are becoming poorer, in particular families, faced, with the savings generated during the pandemic already spent, with a very difficult horizon, in which half of Spaniards are struggling to make ends meet, while The government continues to put them in debt and suffocate them with taxes.
Furthermore, the worrying evolution of economic growth, based on public spending (which has expelled investments, which are below the levels previous to the pandemic), has long pushed prices upward, with a risk of an inflationary resurgence by the end of the year.
On the other hand, the moderation in inflation – which is also rebounding this month – is not due to the government, the current one or anyone, because inflation is a problem. monetary phenomenon and, therefore, it depends on the amount of money present in the system. What a government like Sánchez’s can do is make it difficult to transmit monetary policy by increasing the public spending, which has made necessary a greater intensity and duration of said monetary contraction, but it does not decrease thanks to the government, but it decreases despite the government, which with its policy of excessive public spending introduces elements that can delay the adequate transmission of monetary policy, as I said, aggravating the problem and causing greater efforts by the issuing bank to be able to control it. If the central bank depended on the government, we would probably have the devalued currency several times and increasing inflation, because they would have caused monetary expansion by printing money. Fortunately, it’s not in their hands.
The effects of monetary policy They have an external delay of between twelve and eighteen months and this is what we are currently seeing. The broad monetary aggregate -M3-, which includes cash, deposits up to two years, non-bank private sector bonds and foreign currency deposits, although it has increased slightly in recent months, has declined sharply in over the last three years. , while he was growing up annual rate greater than 10%, now be below 5% after having decreased to more than one 10% in 2023.
Therefore, the ECB You have to be careful and not make a mistake in the pace of rate cuts, especially when there is still excessive liquidity in the market. If an error is made, a new inflationary epidemic which could be worse than the previous one. You must therefore think very carefully about the appropriateness of the accelerated rate reduction policy that you are pursuing, with the latest reduction of twenty-five basis points last Thursday. Let’s hope he’s not wrong, but it wouldn’t be surprising if there could be a resurgence of inflation due to monetary policy easing too quickly.
