Thursday, 14 February 2008

Inflation : 3.8%, an eight-year high

Consumer prices were pushed up most in the year by increases in the prices of food and liquid fuels. The cost of food went up mainly due to risen prices of milk and cereal products, and meat.

Risen interest rates, increases in the prices of restaurant and café services, and retail prices of alcoholic beverages, as well as higher prices of owner-occupied flats and real estate also had an impact on inflation.

By contrast, the rise in consumer prices was curbed most in January by fallen prices of passenger cars, entertainment electronics and computers.

So for the ones who got a 3% or less pay rise, it means that you just got poor by the time you are reading this article. But no worry, according to the ECB it's a "hump", so it should be temporary. Or is it going to be? I guess they thought that oil price would fall in the beginning of the year, after all, everybody planned that the U.S. slowdown will solve this situation ... but it's not happening (the U.S. is slowingdown but not the oil price, or wheat, gold etc... )

So what if the U.S. doesn't go into a recession and the emerging market start to re-accelerate..then a price of 150$ and gold over 1000 $ should not be a surprise to anybody.

This is not the ECB, BOE or the FED that is failing but the emerging central bankers that do not control their economical boom from going into an overheating situation that has implication for the entire world. But let's not put all the fault on the emerging market, there are as well those investors and banks that have pushed people consuming beyond their mean thus stimulating even greater the export from those countries.

Coming back to the Finnish inflation, It's just scary. Almost 4%, it would mean that if the ECB cut interest rates then indeed we will go back to the 90's type of inflation sooner than people will have forecasted.

At the end of the day, the ECB is failing its mandate for the Finnish citizens and that is unacceptable. The weak and the poor will have to pay the price, and that is not fair in this world where the gap between the rich and the poor keep increasing at an alarming rate.

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