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The inflation process turned out to be longer and more intense than expected

Governor of the Bank of Portugal (BdP) Mario Centeno said this Wednesday that the inflationary process was “longer and more intense than could be predicted as a result of a supply shock.”

“This duration tends to be transferred over time to the economy and the financial system, hence the importance we place in our economy on price stability” and, as a result, financial stability, Centeno defended at the opening of the presentation of the Financial Stability Report (REF) in Lisbon.

Under a scenario of high external volatility, future financial stability will depend “to a very large extent on how collectively progresses in reducing inflation,” the governor of the Portuguese central bank said.

“Inflation, sometimes silently, encourages intrusion into the financial cushions of households and companies’ savings. It is set as a symptom of something wrong in our economic system and it can only be fought together and coordinated, and this is the message that we want to convey, and this is the main goal of monetary policy in the near future,” assured the former finance minister. .

The latest National Institute of Statistics (INE) inflation data for October showed an annual change in the consumer price index (IPC) of 10.1%, the highest since May 1992.

As for the Harmonized Consumer Price Index (HICP), it showed an annual change of 10.6% in October, up 0.8 percentage points from the previous month and 0.1 percentage points below Eurostat’s estimate for the zone. euro (in September, the rate in Portugal was also 0.1 percentage points lower than in the euro area).

The BdP said in a REF published this Wednesday that the war in Ukraine and economic developments in China have affected monetary policy and led to “high uncertainty in the economic outlook”, jeopardizing financial stability.

“The invasion of Ukraine and economic developments in China, which affect economic activity and inflation, create uncertainty with implications for the conduct of monetary policy around the world,” the document says.

According to the report, this increase in geopolitical tensions “materialized by increased inflationary pressures, in particular through higher energy and food costs, which were reflected in the prices of other goods and services.”

Added to this factor are elements such as the acceleration of financing costs in various institutional sectors and, as a result, the conditionality of their ability to service debt and the low confidence of economic agents.

“These factors combine to signal significant volatility in international financial markets, with any signs of slowing or picking up economic growth being absorbed and reflected in major equity indices as well as sovereign debt yields,” the statement said. in a report published on the Banco de Portugal website.

Author: Portuguese
Source: CM Jornal

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