Inflation HICP Owner-occupied house Inflation forecast Consequences

There are many reasons for the huge inflation, and they reinforce each other. Considering the recent developments in energy prices, inflation should start dropping from the end of 2022 onwards. The impact of the owner-occupied house price index (OOH) on the harmonised index of consumer prices is quite neutral. Given the large swings in energy wholesale market prices, forecasting the inflation is not evident. The NBB follows a bottom-up approach via the estimation of different components: energy, food, and core inflation. The impact of the high inflation, caused to a large extend by the energy prize shock, implies an impoverishment of the Belgian economy. On average the purchasing power of the households is protected, as a large part of the bill (wage costs) is paid by the companies. But higher wages negatively impact the competitiveness of the companies. Also, the primary fiscal deficit of the government is increasing, while the public debt is growing. In response to the high inflation environment, the ECB has tightened the monetary policy by increasing interest rates and stopping the net purchase programmes.



Jana Jonckheere

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