00:00Let's talk to Mark Oswald now. He's Chief Economist and Global Strategist at ADM Investor Services International.
00:06Always great to have you on Global Business Europe, Mark.
00:09So, is Eurozone inflation becoming a real problem again, or is it just another energy blip?
00:16I doubt very much it's an energy blip simply because of the disruptions that are there,
00:22whether it's in the energy sector, whether it's in petrochemicals, whether it's in fertilisers,
00:30are not going to be unwound in any great hurry.
00:33So, the rise that we saw today was purely energy-driven, primarily petrol.
00:41What will happen in coming months is there will be spillover into, above all, food.
00:52And the question for the ECB is going to be how much sign is there spillover of this into services
01:00prices
01:01and, above all, in the longer run into wages.
01:05And that will obviously depend, to some extent, on the length of this, not only of the actual war,
01:14but of the disruption that follows, because the disruption will persist for quite some time.
01:19Mark, how much can central banks really do when inflation is driven by global supply shocks like this?
01:28Well, what central banks can do is they can do nothing about energy or food prices,
01:34which is why they always look at core inflation.
01:37But they are more than well aware, and one would have to add that they have all been chastised
01:43by the experience of 2022, 2023, post-COVID.
01:48And this time around, they won't be joining the so-called team transitory.
01:53They will be much more ready to take action at the first sign of any spillover.
01:59How much they can actually limit the impact is debatable,
02:04without creating an enormous amount of demand structure, which there will be in any case,
02:10simply because the prices for a lot of businesses and, indeed, for consumers
02:14are simply going to be too high.
02:17You talk about the energy shock and the geopolitical backdrop,
02:22but what about wage growth and services?
02:25Are they a risk at keeping inflation elevated in Europe?
02:29Well, certainly services prices are very much at risk.
02:33Services prices obviously include things like airfares and holidays,
02:36which are going to be heavily impacted and fairly quickly.
02:41Wage growth is debatable because that really depends on how much demand destruction there is.
02:49People or workers will probably want wage increases to compensate them,
02:56but on the other hand, they will be wary that if we are going to face severe headwinds,
03:03if that materializes, I should stress, to growth, then their jobs might be at risk.
03:10And obviously, in the background, a lot of people will be concerned,
03:13well, will this speed up the implementation of AI and automation strategies?
03:19But as a result, we'll lose our jobs,
03:23and they'll be more interested in keeping their jobs
03:26and seeing their wages go up.
03:30Mark Oswald, we have to leave it there, but thank you very much, indeed.
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