U.S. Treasury Secretary Janet Yellen described current inflation levels as unacceptable in her latest public appearance this week. The former Fed Chair called for complementing recent interest rate hikes with concrete measures on energy and pharmaceutical markets.
Inflation has surged globally alongside rising energy and food prices. International authorities emphasize that combating it is a priority: it impoverishes us all and jeopardizes our future. The continuous rise in prices has become the primary global concern given the risk of entering a vicious cycle of higher inflation and lower growth.
Inflation originates from a supply-side problem, and it is difficult to combat a supply shock with demand-side measures. Monetary policy proves inefficient in such a scenario. Central banks are engaged in a process of monetary normalization following conditions that have remained too accommodative for too long, and which are now counterproductive in the current inflationary environment. Fiscal policy can cushion the short-term damage of inflation, but cannot prevent it. In economic policy, only structural reforms and adjustments remain, as Yellen proposes. However, these are measures that require broad political and social consensus, and their effects will be felt in the medium and long term.
The latest SME Situation Indicator prepared by Cepyme showed deterioration due to rising costs, market expectations of official interest rate increases, and falling profitability resulting from all of the above. Inflation harms us all. And it is never acceptable.
The Recovery, Transformation and Resilience Plan financed with Next Generation funds can help us combat it. A robust financial sector will undoubtedly be essential to finance growth in difficult times.
José Luis Martínez Campuzano, Spokesperson for the Spanish Banking Association
