How does the highest inflation in the last 40 years affect us?

Inflation rose again to 8.7% in May, remains at levels almost 40 years ago and affects many variables. In addition to lowering the purchasing power of salaries or pensions, saving or hire Therefore, the Government has decided to set an upper limit on rent increases until 30 June.

Inflation is already a problemSince fuel and electricity prices are transferred to the economy as a whole and predict the future, the price of money risesAs Christine Lagarde, the head of the European Central Bank (ECB), has already admitted.

Indeed, the annual core inflation rate, which excludes the most volatile elements such as energy or unprocessed food, rose to 4.9%, the highest level since 1995. All this fuels and brings with it the claims that the purchasing power of the unions will be restored. Interest rates are closer, as the US Federal Reserve has already done.


Inflation erodes the purchasing power of wages. Collective bargaining agreements signed until April leave an average of 2.40 percent in wages, which was 2.36 percent compared to the previous month, but far from the annual inflation rate. Salaries face 2022 with collective bargaining partially hindered by this inflationary spiral, and a lack of understanding at the highest level among the CEOE, CCOO and UGT, who have been waiting for a year to address a new ‘deal deal’ to guide collective work. bargain. In addition, there is an income agreement on the table where unions must accept wage increases and limitations on employers, margins and benefits. In any case, the difference between employers and unions makes this practically impossible.


As with salaries, With increasing inflation, savings also lose value. The fee for accounts and deposits is practically zero as the price of money stays at 0%. The value of the 100 Euros the year started with is 8.7% less today and they will not be able to find a compensation that compensates or exceeds it. The only way is to take more risk in the stock market. Money currently in bank accounts and deposits earns a return of 0.01% when due for up to one year; According to the data of the Bank of Spain for February, 0.39% for one year to two years and 0.03% for more than two years. In public fixed income, 12-month Treasury bonds show negative returns and you have to go for three-year bonds to get positive returns, but below 1%. Ibex, the main indicator of the Spanish stock market, quoted 7.9% last year, but falls as it rises.


this pensions another income affected by inflation. Pensioners benefited from a small payment to make up for the bias in estimated inflation that helped to update them in 2021. In any case, they will not be able to undo everything that prices have increased, but the reference is the average inflation from December 2020 to November 2021, around 2.5%, as predicted in the partial reform adopted by social agents. In 2022, benefits need to be reassessed from this level, and this should be done every year after their increase has been approved, just like the CPI. Average inflation forecasts for this year range from 5% to 7%.


Another income affected by CPI is hire. This is good news for landlords, bad news for tenants. Therefore, the Government has decided that by 30 June small owners and tenants should negotiate the update and in the absence of agreement, 2%, equivalent to the competitiveness guarantee index. This means that with a deal, the increase can exceed that bar as long as the agreement is reached and the owner is a minor owner. In the case of large property owners, the increase cannot in any case exceed 2% until 30 June. Savings are substantial for the tenant: going from 2u to 1,217 to 1,323 euros for an 85-metre apartment in Barcelona, ​​which would not have been adjusted to go down to less than 1,241.82 euros per month as this would be within the time limit.

Source: Informacion


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