Inflation

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Post n°321

The fiscal roots of hyperinflation: a historical perspective

Published on 09/15/2023

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By Pamfili Antipa

According to Milton Friedman, economics Nobel prize winner, “inflation is always and everywhere a monetary phenomenon”. This blog examines the French assignat debacle and hyperinflation (1795-96) and suggests that unsustainable public finances and fiscal dominance were the primary causes of an excessive increase in the money supply and hyperinflation.

Chart 1: Children playing with marks, 1923
Chart 1: Children playing with marks, 1923
Updated on 09/15/2023 10:31
Post n°320

How does the Banque de France produce inflation forecasts?

Published on 07/25/2023

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By Youssef Ulgazi

According to the Banque de France's projection, French inflation measured by the Harmonised Index of Consumer Prices (HICP) will gradually return towards 2% in 2025. How is this projection produced? This post describes our main tools and shows how, by combining modelling and expert judgement, we produce disaggregated inflation forecasts that are consistent with the overall macroeconomic scenario.

Chart 1: HICP inflation projections in our June 2023 macroeconomic projections
Chart 1: HICP inflation projections in our June 2023 macroeconomic projections Source: HICP inflation (Harmonised Index of Consumer Prices), INSEE up to Q1 2023, Banque de France projections in the shaded area
Updated on 07/25/2023 09:03
Post n°319

How insurers are adjusting to rising inflation

Published on 07/18/2023

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By Aurore Cambou, Frédéric Ahado, Baptiste Moulin et Sarah Gandolphe

The impact of higher inflation varies across insurance categories. Insurers are facing an erosion in the value of non-inflation indexed assets and of their real returns, some of which is associated with an increase in liabilities . However, they have different levers at their disposal to adapt to this environment and meet their commitments towards policyholders.

Chart 1: Breakdown of French insurers' bond portfolios, as a % of the market value of assets
Chart 1: Breakdown of French insurers' bond portfolios, as a % of the market value of assets Source: ACPR - List of assets inS.06.02 template from Annual Solvency II Reporting at 31/12/2022
Updated on 07/19/2023 12:25
Post n°307

Central banks’ announcements and market inflation expectations

Published on 03/07/2023

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By Sophie Guilloux-Nefussi, Cristina Jude, Adrian Penalver, Urszula Szczerbowicz

This post investigates how monetary policy announcements in the US and the euro area have affected inflation expectations since 2021. We show that a 100bp surprise increase in 2-year rates translated into a 30-50bp drop in medium-term inflation expectations. Central banks’ effective communication was the main factor influencing inflation expectations around these announcements.

Figure 1: Response of inflation expectations to a 100bp monetary policy surprises in 2021-2023
Figure 1: Response of inflation expectations to a 100bp monetary policy surprises in 2021-2023 Source: Bloomberg and authors calculations
Updated on 03/07/2023 08:33
Post n°299

New indicators of perceived inflation in France based on media data

Published on 12/27/2022

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By Jean-Charles Bricongne, Olivier de Bandt, Annabelle de Gaye, Julien Denes, Paul Hubert, Pierre-Antoine Robert

The recent rise in inflation could affect households' and businesses' perception of inflation. This post describes new indicators of perceived inflation in France constructed from alternative data: newspaper articles and messages from the social network Twitter. The advantage of such data is that they are available at high frequency and in real time.

Chart 1. Indicators of perceived inflation based on media data (standardised and rescaled) Sources: Factiva, Twitter, European Commission, authors' calculations.
Updated on 12/27/2022 09:49
Post n°298

Dynamics and Implications of the Recent Rise in Wheat Prices

Published on 12/23/2022

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By Raj Rajesh, Paul Vertier, Thibault Lemaire, Arthur Stalla-Bourdillon, and Aude Le Metayer

The increase in global wheat prices in the last two years, especially after the start of the Ukraine war, reflects a strong market integration and a high dependence on energy and fertiliser prices. As several developing countries depend on a small number of wheat exporters, curbing food insecurity will require coordinated action and crop diversification.

Chart 1: International export prices (free on board) of wheat in different markets
Chart 1: International export prices (free on board) of wheat in different markets Source: FAO
Updated on 12/23/2022 14:00
Post n°290

The pass-through of commodity prices to inflation in Africa

Published on 11/10/2022

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By Thibault Lemaire and Paul Vertier

The rise in world commodity prices since mid-2020 has fuelled inflation in Africa. A new estimation strategy shows a pass-through of about 30% from commodity prices to consumer prices on the continent, which is higher than existing estimates. The impact is greater in low-income countries and in those countries where the food share in the consumption basket is the largest.

Chart 1: Impact of a 1% rise in commodity prices on consumer prices in Africa
Chart 1: Impact of a 1% rise in commodity prices on consumer prices in Africa Source: Authors’ calculations based on the local projection method. Data from the World Bank, International Monetary Fund (IMF), International Disaster Database (EM-DAT), and Armed Conflict Location and Event Data Project (ACLED).
Updated on 11/10/2022 16:59
Post n°285

What lessons from US evidence on the heterogeneity in inflation expectations?

Published on 10/07/2022

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By Camille Cornand (Univ Lyon, CNRS, GATE), Paul Hubert

Monetary policy consists in part in managing inflation expectations of different agents. New US evidence on heterogeneous frequency of forecast revisions and disagreement among various categories of agents (households, firms, professional forecasters) suggests that targeting communication to specific groups could be a useful tool for central bankers.

Figure 1 – Distribution of inflation expectations in the US
Figure 1 – Distribution of inflation expectations in the US Source: authors’ computations.
Updated on 10/07/2022 08:26
Post n°275

What are business leaders’ inflation expectations?

Published on 06/23/2022

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By Paul Bouche, Julien Demuynck, Erwan Gautier, Frédérique Savignac

For the first time, the Banque de France is publishing the results of a survey on business leaders’ inflation expectations, collected since the end of 2021. One-year inflation expectations have increased since the beginning of the year and their median stands at 5% in the second quarter of 2022. Longer-term expectations (3-5 years) are also rising, but more slowly, with a median of 3%. This survey was conducted prior to the ECB's monetary policy normalisation announced on 9 June, which is expected to contribute to the gradual "re-anchoring" of inflation expectations.

Chart 1: Changes in inflation expectations since end-2021 in France (median in %)
Chart 1: Changes in inflation expectations since end-2021 in France (median in %) Note: median weighted by the number of employees in the company and the value added in the company's sector, 1% of the highest responses are not taken into account in the calculations. Source: IE-Banque de France survey.
Updated on 06/23/2022 16:33
Post n°268

How much have rising transport costs affected US import prices?

Published on 05/11/2022

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By Sebastian Stumpner

This blog post examines to what extent the recent surge in international transport costs has fuelled US import price inflation. While we find a moderate effect at the aggregate level, there are significant differences across products that are largely driven by the degree of containerisation.

Chart 1: The share of transport costs has increased only for containerised goods
Chart 1: The share of transport costs has increased only for containerised goods Source: Author’s calculations based on data from TradeDataMonitor.
Updated on 05/11/2022 18:19

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