Back to the current question of price increases

Back to the current question of price increases

Inflation generally reflects a rise in the nominal prices of goods and services. It concerns the physical goods and services that economic agents produce and sell to each other.

This is the case for food products, haircuts at the hairdresser’s, accommodation rental, medical care, paid education services or purchases of tractor vehicles or other equipment. In this regard, most goods can be consumed or stored and often be stored for later use or transaction.

Next, it should be remembered that these are only so-called nominal prices referring to sums of money, in dirhams per unit of goods or type of service, such as the price of a liter of gasoline paid, or that the tariff per kilowatt/hour consumed or that of the bus ticket. In other words, the calculation of the rate of price inflation concerns only variations in absolute prices designated by nominal.

Inflation, the cruellest tax

On the other hand, a rise in the price of one or two commodities, such as oil and gas today, for example, is not in itself inflation, and a recorded fall in the price of a pair of espadrilles is not does not represent what is meant by deflation. In the last period, the new elements on the side of production costs consisted of a sharp rise in prices due to the increase in oil prices and food prices Inflation is a process of general and diffuse increases in nominal prices, while that deflation is its opposite.

Coming out of the last confinement, we noted the start of an expansion in private investment, a recovery in building and real estate, as well as that in consumer purchases of durable goods in furniture and means of transport, which had exceeded the productive capacity of the country. As almost everywhere in the world, there was a speculative accumulation of raw materials and intermediate goods, a constitution of various stocks by several companies, also Moroccan, constituting an important factor in the cumulative rise in prices, likely to recall periods of wars and similar crises like that of 1973 in the Middle East or even that of 1950-53 in Korea.

Inflation has the reputation of being the most cruel tax because it considerably reduces the resources of those who have fixed incomes in dirhams. Inflation remains a monetary phenomenon, and the authorities in charge must choose a support policybecause it represents a heavy economic burden for a society and is not the most harmonious or equitable way.

Doing nothing to stop it would tend to ratify to some extent organizations and behavior that introduce inflationary distortion into the economy, with the risk of depressing output and employment, knowing that the anti-inflationary effects are very uncertain and are only felt, at best, very slowly. The Central Bank, like the budgetary authorities, continuously observes and analyzes the phenomenon, generally attempting politically acceptable compromises, oscillating between a sort of alternation of strong support and that of abstention or sticking to a semi-accompaniment like what is happening now.

Recourse to the key rates of a Central Bank like that of Morocco has rarely solved the problem by itself, which moreover constitutes the first objective assigned to the intervention of the latter. This cannot replace real coordination within the framework of a goodwillfirst with the government authorities in charge of the country’s overall policy.

The independence of a major monetary institution is not an end in itself and it is increasingly useful to agree on the real content of the concept of sustainability of a public debt, both the famous interest load poison is not a distant abstraction.

A primus inter pares ensuring coordination and balance between the monetary and the budgetary is required, and the orientation to be negotiated must certainly take into account the decisions of major institutions, such as the European Economic Commission or the European Central Bank, even if they are naturally driven by various types of and sometimes divergent interests. Furthermore, it should be noted in this respect that having been a scapegoat in major crises at the head of the International Monetary Fund, then a follower of an excessively optimistic wait-and-see attitude as President of an ECB in the midst of an inflationary cycle, tends to demonstrate that strong management of certain markets and stakeholders, however important they may be, remains on the whole subject to strong controversy.

The recent return to “normalization of their respective monetary policies” by both the US Federal Reserve and the ECB, through a reduction in the asset purchase program or an increase in key rates, sometimes bears witness toa followership of little use for other economies. In fact, the fiscal response in recent years has become dominant, increasingly relegating central bank rate technique to a rather subdued, if not secondary, role.

Without succeeding in accepting the fact that we have to live with a continuous rise in prices, there is certainly reason to limit the notorious increases in progress directly, by subjecting them to targeted and above all effective official controls.

Finally, it should be noted that inflation only rarely seems to have modified the norms of real income growth to which the beneficiaries of the rate of profit, the shareholders or company managers are accustomed. However, the current contraction in final consumption demand of rural households, due to declining farm income observed during the current year, must constitute the major concern of the public authorities. Especially since the said officially forecast underlying annual inflation would be close to 5%, or even more.

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