"Inflation accelerated to 4.2 per cent in May
The year-on-year change in consumer prices, i.e. inflation, calculated by Statistics Finland was 4.2 per cent in May. Increases in the prices of dairy products, vegetables and liquid fuels put inflation up most from April when it stood at 3.5 per cent.
Over the year, consumer prices were pushed up most by risen prices of housing and food. Housing costs went up primarily due to risen energy prices, rents and interest rates. The risen cost of food was due to increases in the prices of dairy and cereal products, and meat. Inflation was also pushed up by increases in the prices of automotive fuels, restaurant and café services and retail prices of alcoholic beverages from last year's May. The rise in consumer prices was curbed most in May by fallen prices of passenger cars, entertainment electronics and computers.
From April to May, consumer prices went up by 0.5 per cent, primarily due to increases in the prices of fuel and dairy products."
Lots of professional, including Bank Of Finland, got their forecast not only wrong but by a big margin. So either they have been clearly misleading the public as to what they should be prepared for or simply their model are not working making it more worrying for the future stability of the economy.
Inflation at over 4% was something predictable, and to be frank, I still think it's a low level as what people really witness in their daily life...
So now we might be heading toward high inflation and a sluggish economical growth. You can call that "stagflation".
The ECB will hike rate next month , interest rates that are for all the European countries. If it was to Finland, interest rates would have been much higher as inflation un-anchoring has clearly happened. Wage are soaring for immovable jobs (nurses, construction work, etc...) threatening an even greater inflation ahead.
Some are saying that 2009 is similar to 1999. I'm afraid those people are highly optimistic as during that time housing, oil, commodities and food prices were not a problem. I will compare 2009 as 1989 or 1979 just before a sharp rise in interest rates in order to bring back inflation in checks and pushed global oil price down by slowing demand world wide with higher interest rates: we are already witnessing that with almost all central banks around the world increasing interest rates.
Except for the U.S, in recent months they had to lower interest rates in order to rescue the whole financing system from collapsing thus avoiding a systemic risk, a contagion to the broad economy that would have overshadowed even the crisis of 1929!. They have already changed their rhetoric, and seem to be in the path to increase interest rates drastically end of the year in order to calm down inflation expectation
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There is a general feeling on many blogs that the US is hell bent on destroying their currency as soon as possible in order to create assett price rises and save banks.
And a general feeling that the rest of the worlds CB's are cooperating.
Clearly and obviously inflation in europe is way beyond these figures being reported.
The house price inflation apparant world wide could easily have been held back by having prudent lending.
Clearly and obviously there has been an abandonment of prudent lending.
The whole thing stinks
The Finnish situation seems just as smelly as other places if not more so with land held artificially high and property being bought and sold by banks with the banks benefiting many times over.
There is something very very stinky going on here!
"Fire broke out at the Ministry of Employment and the Economy in Helsinki Friday afternoon"
Looks like it's not only the economy that is overheating!
"Effective June 16th, 2008, Kemira Group will raise prices globally
significantly across its entire product portfolio. The increases will
in some cases exceed 25%. The increases will reflect the increase of
costs on a geographical basis and will vary by product. "Costs for
raw materials, energy and transportation have continued to increase,
and no relief is expected in the near future, states Kemira's
President and CEO Harri Kerminen. "Under these conditions our only
choice is to implement product price increases, while we will
continue to take all measures to keep costs under control to minimize
the impact on our customers."
"
Here is an example of 2nd round effect that forces the ECB to increase interest rates.
Kemira could go out of business if other competitors don't follow suit. Indeed they will lose market shares and anti-inflation stance company will be rewarded.
Kemira has no other choices than raising prices maybe because they don't have competitive products thus can't access the mass market or maybe they are involved in market where price fixing and other corrupt behaviour is flying high and where politicians are closing their eyes and at the same time opening wide open their wallet! and please no conspiracy theory...
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