Inflation continues to be a hot topic. The latest data published by the National Institute of Statistics (INE) in Spain has shown a CPI of 10,8%. If the data is confirmed, it would represent an increase of 6 points compared to the annual rate, since in June the rate stood at 10,2%, and would be at its highest level since September 1984.
Why is the CPI rising so much?
According to the INE itself, "this evolution is mainly due to the rise in the price of food and non-alcoholic beverages and electricity, and to the performance of clothing and footwear, whose prices have fallen less than last year." For the INE, the estimated annual rate of variation of the underlying inflation, that is, the general index without unprocessed food or energy products, also increases six tenths, up to 6,1%, which would place it at the highest rate since January 1993, when Spain was devastated by an economic crisis.
When will prices start to drop?
The indicators do not allow us to anticipate anything encouraging for the remainder of 2022. On the one hand, Russia's war against Ukraine The European energy market continues to be under pressure. Cuts in gas supplies from Russia to Germany and the complete cut-off of other countries dependent on Russian gas do not allow for optimism for the autumn-winter. In fact, the price of natural gas has already reached its historical maximum prices in July, and in Germany there are already fears of a recession from September-October if supply cuts continue.
Another factor that does not allow us to be optimistic is the weakness of the Euro-Dollar pair. With the exchange rate at virtually 1-1 for the past couple of months, European industries and governments that want to buy raw materials such as oil in dollars have to pay more euros for the same amount of material, thus contributing to inflation.
Finally, although there are already some "green shoots" with the fall in prices of construction raw materials, it seems that it will have no effect in the short term and will not impact the prices that we as consumers have to pay until well into 2023.
How does inflation affect the money I have in the bank?
You may have noticed it in your pocket, but the money you have outside the bank lasts less and less because everything is more and more expensive. However, the money you have "saved" in the bank It is also affected (and greatly) by inflation. When inflation is at this level, the euro you have in the bank today will not have the same value as it will in a year. What you can buy today for €1 will cost you €1,10 next year with this inflation. If you multiply this by everything, the loss of purchasing power is significant.
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