Refueling, heating and shopping become more expensive every month. What's behind the climb? And will the trend soon be over?

In Switzerland, refueling, electricity and dining out have become even more expensive.

That means the global price increase for Switzerland

Prices are rising all over the world.

That means the worldwide price increase for Switzerland

In the euro zone, prices rose by an average of 4.9 percent in November compared to the same month last year. That's more than ever since records began in 1997.

That's what

  • Inflation rates are rising worldwide.

  • Reason are the pandemic and the loose monetary policy of the central banks.

  • The new Corona variant Omikron could provide another price hike.

  • The most important questions and answers about the worldwide price increase

The prices for goods and services are increasing worldwide. In the USA, Germany and the entire euro area, inflation, also known as inflation (see box), has been rising steadily for months. What's behind the climb? And is everything getting more and more expensive in Switzerland now? The most important questions and answers:

How much are prices rising?

The inflation rates are currently reaching new record levels. In the euro zone, prices rose by an average of 4.9 percent in November compared to the same month of the previous year. That is more than ever since records began in 1997. In Germany alone, inflation rose by 5.2 percent and cracked the five percent mark for the first time in almost 30 years. In the USA, prices rose even more sharply by 6.2 percent.

How is it in Switzerland?

Inflation is also rising in this country, albeit less strongly. In November prices rose only moderately by 1.5 percent compared to the previous year. In October it was 1.2 percent. According to Matthias Geissbühler, the relatively low inflation has, among other things, to do with the current strength of the Swiss franc. “This is inflation-dampening,” says the investment boss of Raiffeisen Switzerland to 20 minutes. Above all, goods that Switzerland imports from Europe cost less when converted into francs, which limits inflation on average.

Which products are more expensive?

Because of the rise in prices, consumers have to leave significantly more money behind. In Switzerland, for example, refueling, electricity and dining out have recently become even more expensive. In the euro area, too, the costs at the petrol station and for heating have risen massively. In addition, there are higher prices for food and beverages. In the USA, for example, you have to pay more and more for clothes, meat products and cars. In the USA in particular, many different goods are affected by price increases, says Geissbühler.

Why is inflation going through the roof?

The global economy recovered quickly from the Corona crisis. “However, the supply cannot keep up with the demand,” says Geissbühler. Because companies are stuck. For months they have been struggling with production gaps and delivery bottlenecks. In view of the increased demand, raw materials are also scarce. That leads to higher prices. “We are therefore dealing with both demand-driven inflation and a supply shock,” said the economist.

Are prices only increasing temporarily?

Economists disagree on this. Many see the rise in inflation as a temporary phenomenon. Prices are expected to rise less sharply again at the beginning of next year. Meanwhile, US Federal Reserve Chairman Jerome Powell sees things differently. With the new Coronavirus variant Omikron there are risks for the economy, he said on Tuesday. Inflation may therefore last longer. Matthias Geissbühler also sees further increases in prices – even if not at the current level. “Because the delivery bottlenecks won't stop anytime soon.” However, there is then the risk of a wage-price spiral (see box).

And what can be done against inflation?

The most important central banks have been pursuing loose monetary policies for years in order to stimulate the economy and consumption. However, critics see this as a driver of inflation and warn of permanently high prices. The central banks are therefore under pressure to scale back their economic programs – despite the pandemic. “The central banks are in a dilemma – either fight inflation or continue to support the economy with a loose monetary policy,” says Geissbühler. However, given the inflation in the US, he now sees an interest rate hike coming more quickly. “There should be a first in the second half of 2022.”

That is how dangerous inflation is

Inflation is generally understood to mean the steady rise in the price of goods and services. This increase in consumer prices in an economy is usually recorded as an inflation rate over the previous year. The calculation is based on a fictitious shopping basket depending on the consumer behavior of the citizens examined. The price changes for more expensive products such as electricity are weighted more heavily than for sugar or postage stamps.

Excessive inflation can lead to a price spiral. Because higher prices mean that consumers get less for their money. So they will demand higher wages in order to be able to maintain their standard of living. In order to pay the higher wages, companies will in turn continue to raise the prices of their products. This creates a vicious circle.

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By Teresa Tapmleton

Teresa Tampleton has been a reporter on the news desk since 2018. Before that she wrote about young adolescence and family dynamics for Styles and was the legal affairs correspondent for the Metro desk. Before joining The Nizh TEkegram, Teresa Tampleton worked as a staff writer at the Village Voice and a freelancer for Newsday, The Wall Street Journal, GQ and Mirabella. To get in touch, contact me through my teresa@ntelegram.com 1-800-268-7341

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