THE inflation remains above market price target in August European Central Bank (ECB) by establishing itself at 2.3% over one year (one tenth more than in the leading indicator). The underlying also stands at 2.7% over one year, with a strong downward resistance, and the CPI has harmonized with the European Union (EU) at 2.4% over one year, which is consistent with the rest of the EU and which the ECB uses as a price indicator, showing that the price level in Spain is still 20% higher than the ECB’s target for the eurozone (2%) and two tenths above the average inflation in the eurozone.
Moreover, the ECB itself is very concerned about the resilience of inflation. service sectorwith 4.2% over a year, which makes it more cautious in its monetary policy and, perhaps, slows down the pace of rate cuts. The most serious thing is that these high inflation rates occur on very high price levels reached in previous months, which continues to reduce the purchasing power of economic agents.
Let us remember that many products have seen their prices increase exponentially: thus, above already very high levels, the price of foodstuffs increased in August by 3.1% year-on-year; pork, 2.1%; oils, 19.1%, which has been increasing exponentially for several months; dairy products, 0.6%, in addition to the already significant increases in previous months; potatoes, 6.4%, with an acceleration year-on-year; fish, 1.8%; sugar, 3.4%. All this is based on cumulative increases that have already been very significant in recent months. This means that since Sánchez took office, inflation has increased by 19.27%, while core inflation, during his term, has increased by 17.47%.
This reduces the disposable income of economic agents, who are becoming poorer, especially families, who face, with the savings generated during the pandemic already spent, a very difficult horizon in which half of the Spanish people struggle to make ends meet, while the government continues to get into debt. them and suffocate them with taxes.
Once most of the grants that has camouflaged the evolution of prices, we see to what extent Spain continues to have a structural inflation problem. In addition, once the aid and tax cuts were removed, inflation increased: the constant tax index for the month of August was 3 tenths lower than the general CPI once taxes were increased. There you see the negative inflationary effect of taxes.
Furthermore, the worrying development of economic growth, based on the public spending (which has driven away investments, which are below pre-pandemic levels), is pushing up prices. The government, with this policy of excessive spending and high taxesFurthermore, this makes it difficult, by artificially exerting upward pressure on prices, to adequately transmit the ECB’s monetary policy and means that it will have to maintain it for longer and with greater intensity, as it fails to overcome the resistance to achieve the ECB’s inflation target of 2%, with the Spanish harmonised CPI still 20% above said target, with an underlying presenting great resistance to the downside.
