Skip to main content

ECB warns for inflation danger.

 

ECB
The European Cent­ral Bank’s pres­id­ent has warned of the risk of a «tit-for-tat dynamic» between com­pan­ies and work­ers that pushes up profit mar­gins and wages, increas­ing price pres­sures as both groups try to avoid a hit from higher infla­tion.

Christine Lagarde said yes­ter­day that the ECB’s recent increases in bor­row­ing costs were «only start­ing to take effect now», and signs that infla­tion was per­sist­ing at high levels meant it had to «bring rates to suf­fi­ciently restrict­ive levels to damp demand».

«This makes a robust strategy going for­ward essen­tial. So far, we do not see clear evid­ence that under­ly­ing infla­tion is trend­ing down­wards. Instead, we see two forces push­ing under­ly­ing infla­tion in dif­fer­ent dir­ec­tions».

Lower energy prices are push­ing infla­tion down, but buoy­ant domestic demand is off­set­ting this, as com­pan­ies raise profit mar­gins and work­ers seek higher wages in tight labour mar­kets.

The euro climbed after Lagarde spoke, rising 0.3 per cent to a five-week high against the dol­lar of $1.080.

Echo­ing this, Ger­many’s eco­nomic coun­cil warned yes­ter­day that fin­an­cial mar­ket instabil­ity could under­mine efforts by cent­ral banks to fight infla­tion, as it pre­dicted price growth of 6.6 per cent for Ger­many in 2023.

Lagarde called for a «fair bur­den­shar­ing» between work­ers and com­pan­ies to dis­trib­ute the losses caused by higher infla­tion, which she said would bring wages and price pres­sures down. But if both groups «attempt to uni­lat­er­ally min­im­ise their losses», it could push up profit mar­gins, wage growth and prices all at once. «The risk of such a ‘tit­for-tat’ dynamic is also heightened by the pro­spect that labour mar­ket tight­ness will linger,» she said.

www.sba.tax

Labels:

Comments

  1. Charles23 March 2023 at 12:38

    If Lagarde is waiting on companies and workers to be fair, she is mistaken. This is not happen. Companies want bigger profits and workers want to be paid more. Both don't care as much about the harm they are doing to the economy and how their actions will increase prices. They care about themselves.

    ReplyDelete
    Replies
    1. Alvin23 March 2023 at 14:02

      You need to come up with measures that encourage the right behavior and make the wrong one unwanted. This is how you solve this not by asking everyone to be "fair". It will never work.

      Delete

Post a Comment

Cloud Bookkeeping

H&M struggles with profitability.

  H&M blamed high clothes prices ,  its exit from Rus­sia and a cost-cut­ting pro­gramme for an unex­pec­tedly large col­lapse in its earn­ings as the world’s second-largest fash­ion retailer’s struggles with prof­it­ab­il­ity con­tinue .  Oper­at­ing profit plunged 87 per cent to SKr820mn in the fourth quarter to the end of Novem­ber from a year earlier .  Shares in H&M fell more than 4 per cent to SKr125 . 80 yes­ter­day ,  hav­ing lost nearly half of their value since their recent peak in April 2021 .  The Swedish retailer ,  which lags behind Indi­tex ,  the Span­ish owner of Zara ,  in sales and prof­it­ab­il­ity ,  launched a SKr2bn cost-cut­ting pro­gramme last year that included 1 , 500 job losses . H&M’s sales in the fourth quarter were up 10 per cent to SKr64 . 4bn but flat in local cur­rency terms .  It said sales from Decem­ber 1 to Janu­ary 25 had increased 5 per cent in local cur­ren­cies .  «Sales in ...
2 comments
Read more

Commercial properties continue to fall

  UK commercial property values and rents are projected to «tumble off a cliff edge» in the first quarter of 2023, as estate agents warn offices will fare worst as prices fall. A survey of more than 400 commercial agents forecast a 2.9 per cent decrease in prices per square foot across the industry in the first three months of the year, with offices falling 3.1 per cent. «Where we saw the market stop still, we will see the market finding its level, people working out where things are, where value is,» he said. Listed vehicles have already seen this valuation drop in their share prices, with real estates investment trusts such as Land Securities and British Land falling by a fifth or more this year. According to the RIB estate report, offices are expected to suffer the most significant sales price falls, with nearly a third of respondents expecting them to come down by more than 5 per cent. In addition, the survey projected a 1.3 per cent fall in rents per square foot over the perio...
Post a Comment
Read more

BoE is considering to increase deposit guarantee.

  According to anonymous sources, the Bank of England is considering reforming its deposit guarantee scheme. The move comes in response to concerns that the current system may not be sufficient to protect customers in case of a bank failure. The Financial Services Compensation Scheme guarantees deposits up to £85,000 per person per institution. However, some experts have raised concerns that this may not be enough to prevent a run on banks in a significant financial crisis. As a result, the Bank of England is reportedly considering several options for reforming the scheme, including increasing protection and introducing more stringent bank regulations. A final decision on any changes will be made later this year. One option the Bank of England considers is increasing the protection offered by the deposit guarantee scheme. This could involve raising the maximum amount guaranteed per person or extending coverage to more types of deposits. Another possibility is to introduce more stri...
Post a Comment
Read more