Inflation under the Fed and ECB microscope – What worries Athens?

The word inflation dominates almost every recent economic analysis, commentary and opinion, with this element having emerged as the number 1 factor for decision-making by Central Banks and the course of recovery of the world economy.

The Federal Reserve and the ECB are monitoring the significant price increase.

A number of parameters have led to explosive price increases with analysts arguing over whether the phenomenon is temporary (as the Fed and the ECB insist) or whether it will last.

Strong demand growth, due to the rapid economic recovery, supply chain problems, price increases in key commodities due to extreme weather conditions, shortages of basic raw materials, but also low lending rates make up an explosive mix for prices.

The shadow of price increases is spreading over the Greek economy, causing concern in the financial staff.

For July, the price increases in the basket of Greek households showed their teeth as there were increases in basic goods and services, such as food, housing and transportation.

According to the Hellenic Statistical Authority, the comparison of the National General Consumer Price Index for July this year with the corresponding index last year resulted in an increase of 1.4% compared to a decrease of 1.8% in the respective comparison of 2020 with 2019. In comparison June 2021 showed a decrease of 1.4% compared to a decrease of 1.7% that occurred during the corresponding comparison of the previous year. The average index of the twelve months August 2020 – July 2021, compared to the corresponding Index of the twelve months August 2019 – July 2020, showed a decrease of 1.1% compared to a decrease of 0.4% recorded during the corresponding comparison of the twelve months August 2019 – July 2020 with the twelve months of August 2018 – July 2019.

The largest increases, compared to last year, in food prices by 1.7%were in lamb, goat, fresh fish, cheese, olive oil, other edible oils, fresh fruits, fresh vegetables. There was a sharp increase in housing (4.2%) due to rising prices for electricity, natural gas, heating oil, but also in Transport (5.8%) due to rising prices for fuel, new cars, tickets, passenger transport by plane . The picture is similar in the monthly increase as the prices in housing, transport and hotels and restaurants had the most significant increase. On the other hand, price reductions were mainly in the clothing and footwear sectors, communications, due to a reduction in prices mainly for telephone services (2.7%) and personal care items, and vehicle insurance premiums (1.2%).

Preliminary data for the euro area in July show that consumer prices rose by 2.2% this month, not only from 1.9% in June, but also from the 2% threshold set by the European Central Bank.

Consumer prices in the United States rose at a slower pace in July, but inflation remained at historically high levels amid continuing disruptions in the supply chain and strong demand for travel-related services as economic activity recovered.

In particular, according to official data released on Wednesday, the consumer price index rose on a monthly basis by 0.5% last month after rising 0.9% in June.

Compared to the corresponding month of last year, the CPI increased by 5.4%.

Structural inflation rose 4.3% year-on-year from 4.5% in June.