VS‘was a little music, it becomes a symphony. On Wednesday, October 6, the New Zealand central bank announced the hike in its interest rate. It will be increased by 25 basis points to 0.5%. The first increase in seven years. Before it, Norway, the Czech Republic and South Korea had done the same. Everyone is worried about the return of inflation. The sudden surge in energy prices reminded us that the phenomenon could be violent, which takes us back furiously to the 1970s.
At that time, following the first oil shock of 1973, the inflation rate blithely exceeded 10%. Then, in the 1990s, it fell back on average to around 5%, before falling to 3% at the threshold of the 2000s, then below 2%, a level set by economists and central banks as the optimum for the economy. functioning of a stable economy. Since then, it was rather stagnation that threatened, with an increase in wages and prices almost zero.
In August, in the United States, inflation stood at an annual rate of 5.3%. The rise in prices, which can be explained by all kinds of shortages that emerged after the crisis, from electronic chips to steel and food raw materials, is not enough to create the inflationary cycle. Wages must also follow by indexing themselves to the rise in prices, leading the economy into a vicious circle familiar to emerging countries, such as Argentina and Turkey, and from which it is very painful to come out.
2022, a crucial year
However, in turn, wages are quivering. At least in the UK, where the Bank of England estimates they grew 4% in the private sector. It remains to be seen whether it will be the same in Europe. This is not the case for the moment and, in the United Kingdom, the increase is largely due to the departure of foreign workers due to Brexit and the health crisis. For the moment, job shortages, whether in the United States or in Europe, are pushing more productivity than wages.
There is therefore no question, at present, of a rise in short-term rates. The United States Federal Reserve has indicated that it will not do so in 2022, and the European Central Bank (ECB) is not considering it for several years. Before that, they will gradually reduce their direct aid to the economy. The year 2022 will be crucial, as it should see both a slowdown in growth and a normalization of supplies which should ease commodity prices.
You have 15.55% of this article left to read. The rest is for subscribers only.