2023-06-07 06:05:02
June 7, 2023
Please note that the interview was conducted in English and translated into Dutch and French. In case of discrepancies between the versions, the English version prevails.
People are tired of inflation. What hope can you offer them? When will inflation return to 2%?
Core inflation (which excludes volatile food and energy prices, editor’s note) is more persistent and remains high, with services playing a key role due to the relatively strong impact of wage costs on inflation in these sectors. Rising food prices are also contributing to inflation, but we expect food inflation to decline due to the global slowdown in agricultural commodity prices.
According to our March projections, inflation will only return to our 2% target in 2025. This would mean above-target inflation for regarding four years – a very long time. An important question is how this may affect corporate and household inflation expectations, and thus corporate pricing and wage negotiations.
Wage settlements can have a prolonged effect on inflation due to their long duration. This is why it is so important to keep inflation expectations firmly anchored to our target and to bring inflation back to 2% as quickly as possible.
You said food prices are still quite high. And this is the case as the United Nations food price index peaked a year ago. What is going on ?
It’s somewhat comparable to energy prices. There, we saw a surprisingly rapid transmission from rising wholesale prices to consumer prices, followed by a more gradual downward transmission. We might see a similar development in food prices. This shows how difficult it is to predict how price changes will be transmitted to consumers.
In the longer term, we might face recurrent periods of sharp increases in food prices due to climate change, leading to more frequent droughts, extreme weather events and failed harvests.
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