The Damage Inflation Will Still Create

The advance data on the CPI for this month sets off alarms, after placing its interannual rate at 5.5%, a level not seen in almost 30 years. However, there are voices calling for calm claiming that this level already marks the ceiling at which inflation will end in 2021 to begin, later, a decline throughout 2022.

This argument has in its favor the behavior shown in recent weeks by the great culprit of the price hikes: gas. The futures on the price of this hydrocarbon chain three days of setbacks .

And this trend is expected to continue due to Russia’s decision to increase pumping to boost supplies to Germany and Austria next month. However, it would still be hasty to end the problems of recent months in the gas market.It remains to be seen what will be the effect of the inevitable increase in demand that will come with winter, in an area where supply tensions still exist.

What’s more, the CPI continues to show worrying behavior even after isolating the effects of energy. This is evidenced by core inflation in Spain, which, after months of staying below 1%, is already close to 1.5% and forecasts suggest that it will continue to rise due to the general shortage of supplies.

It remains to be demonstrated that the CPI has reached its ceiling and is set to moderate as of 2022.

Therefore, experts warn that there are symptoms that high inflation, even when it moderates its rises, could stabilize at its current high levels. In fact, not even the new reassuring message from the ECB, arguing that the price rebound is temporary, did not convince the markets. The high CPI remains a major threat to the recovery.

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