2023-07-28 18:00:22
LLife is expensive and yesterday’s prices will never come back. The peaceful years of low and predictable inflation are behind us, and the bohemianism of inflation rates below 2% “means nothing at all anymore”. This is evidenced by the successive and incessant increases in the prices of the 1,067 varieties of goods and services consumed in Morocco, since November 2021. If indeed these increases weigh heavily on the household basket, and literally lighten it, they nevertheless seem played down by an aggregation bias inherent in the calculation of the consumer price index.
Indeed, the latter increased by an average of 6.6% in 2022, while the partial indices of food products and transport increased, respectively, by 11.2% and 12.2% during the same year. So goes the world and the CPI. The good news is that this inflationary surge is on the way to being reduced, we still have to believe it. Whether programmed or spontaneous, disinflation is on the horizon. In any case, this is what the latest CPI figures lead us to believe, whose year-on-year evolution is clearly slowing down from the February 2023 peak.
In this case, the inflation rate fell to 5.51% in June 2023, following having stood at 7.08% a month earlier and at 7.83% last April. If future inflation subscribes to this order of ideas, life in Morocco would certainly be more comfortable, and the government would probably be confirmed in its official thesis as to the origin and nature of this inflation. It is a wave of inflation, we are told, a wave coming from elsewhere, which has swept over the Moroccan coast and which should dissipate. And wanting to technicize the discourse, we will be told that it is an exogenous costpush supply shock, initially perceived as transitory and which has proven to be persistent. And although it is a diffuse inflation that has become embedded in the structure of production costs, it is not a tide, or a “structural” inflation as described one day by a producer of statistical data who, from the height of his office, set himself up as a producer of economic policies. And yet, it is otherwise.
Assuming that this rate of disinflation is maintained and takes hold over time, a delay of six months is to be expected to pull inflation down to a floor of 2%, and this in a scenario that might not be more optimistic. Therefollowing, and assuming that the CPI will continue to rise at 2%, a constant gap should separate it with the counterfactual CPI from inflation maintained at 2% since November 2021. Therefore, the two CPIs thus scripted should form two parallel lines. This means that despite this hypothetical process of disinflation, and despite a return to any inflation target, we will face a break in the trajectory of the price level. It goes without saying that, when one of the two bodies which move at the same speed is propelled forward, even while recovering its initial speed, it will always be a length in advance compared to the other. By analogy, the recent deceleration in inflation, although commendable and long-awaited, can in no way correct or even hide the sad reality of a drift in the general level of prices. This is why social demand is none other than deflation, warn us some political entrepreneurs who, grappling with the moment of inflation, engage in a politicization of the economic issue. Their reason does not lack arithmetic: cumulative inflation in June 2023, that is to say in biannual comparison, is around 13%, with food inflation which stands at no less than 24.71%.
As a forward-looking framework for these remarks, they warn that disinflation would hardly be enough, because only a course of deflation is able to restore the initial level of the CPI. The rhetoric that emanates from it is highly emotional and does not fail to stigmatize. And then, it’s simple: inflation “we” hurts and “they” are the criminals. The “them” being the source of evil and the “us” having victim legitimacy, the devil and the side of the Good being defined, clarity being in “our” criticisms and stupidity in “their” actions, here are the elements united. of a populist variant of political discourse. To the delight of this populist reflux, the responses are very often elitist. On the BAM side, the essence behind the monetary act is not to keep the CPI constant, but to keep its slope constant. Although it is written in its statutes, one would have understood it, it was never a question of price stability literally, but of price stationarity around a slope, this being the target of monetary policy.
This is therefore the promise made to us by BAM: a life whose cost, certainly increases, but only slightly. Thus, a return of prices to the level of the pre-wave of inflation is hardly conceivable, or even feasible. As for the executive, the narrative is very coherent and no less elitist: the sky is less lenient, the earth groans under the chariots of a Tsar and the cost of living is always and alas at the expense of some underground deposits. We must give time to time and, above all, trust the people’s elected elites. In short, “with time, everything goes away”, and this inflation, one day, it will surely go away. Inflation carries social risks and the breakthrough of populism is as much. The prescription of a deflation cure may be the result of a diagnostic error, except that it flatters bad inclinations and discredits our institutions. Today, our national fight is once morest inflation and we must defend it. Our institutions cannot make the promise of a less expensive tomorrow and we must say why. The cure is neither in populist rhetoric nor in official discourse filled with elitist daydreams. It’s a matter of (good) communication. In the state of the people, a state discourse is to be prescribed. To be continued.
By Hachimi Alaoui Professor of monetary economics and research team leader
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#drift #prices #populist #ebb
