Monday, 10 December 2007

Risks of Higher Inflation For Finland

Bank of Finland governor says pay deals risk higher inflation

"Erkki Liikanen, the governor of the Bank of Finland, said in a statement Monday that pay deals struck over the course of the year risked higher inflation."

"Wage rises above the rate of recent years pose ever greater demands on productivity growth. If productivity growth does not improve and costs accelerate, jobs will be lost," Mr Liikanen added.

Finland inflation doesn't influence much the ECB. So what to say about Liikanen comments? nothing much except a message for the Finnish company to increase their productivity otherwise competitveness will be lost.

Lots of people are retiring so the job rate will go down anyway, at least until 2015, effectively putting more pressure on capacity and prices. Immigration is helping on the margin. The growth that Finland has known over the past 2 decades is gone.

What would that mean for the residential market? a cooling down, a stabilization of prices at best.

Source: Bank of Finland, Newsroom Finland
Related: Challenging Situation


Anonymous said...

My guess is that the 12 Month Euribor will shoot up to 5.25% or 5.5% within 3 months. Most probably peaking around March.

Anton said...

With all strikes an salary rise we are witnessing, I doubt that interest rates can stay at 4% level.

Finnish pharmacists won a 14.2 percent raise on Dec. 7, ending a three-week strike.

Italian banks on Dec. 8 signed a new contract with unions to increase salaries for employees in the financial industry by more than 12 percent by 2010.

Germany, railway Deutsche Bahn AG on Nov. 30 reached an agreement with 135,000 employees to raise their salaries by 10 percent through 2010.

HousingFinland said...

I don't recall such wage rises through Europe neither prices of Food and oil that high except in the 70's or late 80's

I think low interest rate are from the past. In the next decade, they will most probably average the 6-8% range thus ultimately pushing real estate asset correction.

After all in the past decade housing price rose as interest rates were falling, the reverse will ultimately be true...