Just when oil prices started going up and eased the task of the European Central Bank (ECB) to achieve the target inflation, the foods became increasingly prevailed on the basket of products that measure the dynamics of the price level. The recent data indicate that food prices are equally strong negative factor for inflation as the energy prices are.
The difference is that while oil prices and therefore of energy products gradually started to go up, the fluctuations in food prices slowed this year. The delays in food prices is not new, as during most of 2014 it limited the acceleration of inflation more than energy products.
Now, oil goes up after the agreement reached between the largest producers worldwide. In this development, when we talk about inflation, increasing attention will attract food prices and their movements.
ECB expects headline inflation to “increase significantly” in 2017, as 80% of this acceleration will be the result of the dynamics of energy products. Meanwhile, in terms of food is expected to be weak contribution to increase in most Compassion event, and the risks of back price movements remain.
Besides the weather conditions and lower commodity prices worldwide, the Russian embargo on imports from the European Union (EU) is also a key factor for oversupply of food within the Eurozone. Looking forward economists expect only a slight acceleration of inflation in food and general risks remain tilted to the downside.