Economist Albert Hirschman once warned against using rigid models to explain the economy, urging us to look at the specific dynamics of each situation. This advice is crucial right now as we face a tricky mix of rising inflation and soaring borrowing costs.
- Energy prices, especially for electricity and fuel, have pushed the Eurozone’s inflation rate to 3.8% and Spain’s to 5%.
- Fresh food prices are also climbing, driven by higher production costs and tough weather conditions.
- These rising costs are creating a ripple effect, increasing the risk of what experts call “second-round effects.”
- Because of this, the European Central Bank may need to raise interest rates again before the year ends to keep things in check.