At the beginning of the year, inflation was doing surprisingly well here in Hungary and in the Eurozone, but there was one component whose price changes do not look good: services are significantly more expensive. It is not a European or Hungarian phenomenon, similar processes are taking place in the United States. The rise in the price of services reveals domestic price pressure and highlights the risks inherent in rising inflation – therefore also urges central banks to be cautious. Due to its importance, we deal with service inflation in a separate series of articles: we ask Hungarian macroeconomic analysts about the causes of the phenomenon, the risks and, in general, the danger of inflation and high interest rates. In this article Mariann Trippon, CIB Bank’s chief economist we will explain your answers.
Portfolio: This year, service inflation is clearly driving up the consumer price index both in this country and in the USA and the Eurozone, service inflation far exceeds the central bank’s target levels. In addition, we do not see a downward trend in the annual indices. Should we be worried about this?
Tripp Mariann: There is no reason to panic, but in the last phase of the fight against inflation, the sticky items of inflation should receive special attention from the monetary policy makers. The incoming data confirmed that disinflation is clearly on a slower path this year. We are past the easy part of the reduction in inflation, this year we have to fight for every tenth of a percentage point.
To which you can find answers in our article:
- How is inflation expected to develop in Hungary?
- What are the main inflation risks?
- Why does the rise in the price of services lead to inflation both at home and abroad?
- How is the interest rate path expected to develop?
- What is the danger of inflation being stuck high?
- Why does inflation develop differently in this country, in Europe and in the USA?
