Friday, July 1

How does the highest inflation in almost 30 years affect us?

The rise in inflation, which stood at an interannual rate of 6.7% in December, has many repercussions on daily life, ranging from the purchasing power of wages to the one of the savings or the income that tenants they pay for the rents. A level like the current one has not been reached for almost 30 years. Specifically, since March 1992. The upward pressure on prices, if it persists, is an element that may cause future increases in interest rates.

The biggest responsible for this rise is the price of electricity, but food also contributes. All this indicates that what began in energy is being transferred to the economy as a whole. A former president of Germany’s central bank, the Bundesbank, compared inflation to the action of extracting paste from the toothpaste tube: it is easy to remove, but then it is almost impossible to put it back inside.

The wages They lose purchasing power to the same extent that inflation exceeds them. Until last November, the salaries agreed in the agreement recorded an increase of 1.49%, what supposes a gap of 5.21 points Of diference. The constant escalation of the general price level has caused the unions are demanding salary increases. The employers’ associations or the Bank of Spain warn that this trend would mean entering the vicious circle of the so-called price-wage spiralBy means of which the increase of some feeds that of the others in a constant way. In any case, the increase in prices, which is moving from energy to the economy as a whole, as the evolution of the Underlying inflation – the one that excludes the energy prices of unprocessed foods, which are the most volatile – shows that a phenomenon that the monetary authorities initially considered transitory could be a bit more structural. Hopes are pinned on the spring, when gas prices are expected to fall, one of the variables that most pushes up the price of electricity.

As is the case with wages, the saving it loses value with rising inflation. In an environment of interest rates at 0%, the return on accounts and deposits is practically nil. The 100 euros from when the year began are worth 6.7% less today and they will hardly find a remuneration that compensates or exceeds it, unless they are willing to take great risks in the stock market. Currently, the money that is in bank accounts and deposits you experience a return (so to speak) of 0.01% when you have a term of up to one year; 0.47% between one year and up to two and 0.02% in terms of more than two years, according to data from the Bank of Spain referring to October. In public fixed income, the 12-month Treasury bills show a negative yield of 0.59% and the 5-year bonds, of -0.19%. Until now, the Ibex, the main indicator of the Spanish stock market offers 7%, but just as it rises, it falls.

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The rise in the CPI also affects pensions. Pensioners will benefit from a payment to compensate for the deviation with respect to the estimated inflation that served to update them in 2021, 0.9%. In any case, they will not recover everything that prices have risen, 6.7% per year, but the reference will be the average inflation from December 2020 to November 2021, located around 2.5%, tl as predicted by the partial reform agreed by the social people. In 2022, benefits must be revalued from this level. Taking into account the evolution that the consumer price index (CPI) is having, it is foreseeable that in 2022, the beneficiaries will also have to receive a compensatory pay if prices skyrocket as is happening in the current year.

The rentals They are also affected by the rise in inflation, which is good news for the owners, but bad for tenants. Those who have a contract that is reviewed in December will see their income increase by 6.7%, which is usually the reference that is set in the contracts, that is, the interannual rate of inflation, unless this is corrected in the balance sheet. definitive that the National Institute of Statistics (INE) will publish in the middle of next month. In this way, a rent of 700 euros would become 746.7 euros, that is, 46.7 euros more per month and 560.4 euros more per year. In Barcelona, ​​with an average monthly rent of 1,078 euros for a 70 square meter apartment, the increase would mean paying 1,150.2 euros. In Madrid, in a monthly rent of 1,022 euros for a house of the same surface, the rent would become 1,090.5 euros, with the data from the Idealista portal.

Reference-www.elperiodico.com

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