Can the cold that affects crops have an impact on the level of inflation?

Can the cold that affects crops have an impact on the level of inflation?

In moments where inflation has been within the target range for 11 consecutive months, an alarm signal goes off in agriculture, since it is expected that the cold affect some crops and that could generate an impact on the CPI which measures the INE.

The low temperatures of the last few days, added to those expected and the high demand of certain products, would generate an increase in the prices of some vegetables, although for the moment it would still not affect the plans of the Central Bank of Uruguay (BCU).

The head of the Market Information Area of ​​the Metropolitan Agri-Food Unit (UAM), Pablo Pacheco, stated in dialogue with Subrayado that “the cold reduces the speed of development of the crops”, something that coincides with “a situation that has already been complex for some time.”

“This, in some way, is going to accentuate the rise in some quotes and it is already being observed in the prices that the final consumer pays at the points of Retail sale”, Pacheco warned about the values ​​of products such as vegetables of leaf, the tomato, he morron and the eggplant.

To this, the UAM leader added “winter consumption habits and preparations with pot-cooked meals, which put pressure on the consumption of some products.”

How inflation is progressing and what economic agents expect

The CPI has been within the target range for 11 months and in April it marked its fourth consecutive drop, going from 3.80% to 3.68% year-on-year. However, economic agents raised their inflation expectations, taking them to 5.50% by 2024, when the previous month was 5.41%.

The change in trend may be due to several factors, among which appears the average income of households, which rose 6.4% year-on-year in the first quarter, due to the influence of a better real salary.

Added to this is another axis such as monetary politics, with a BCU that kept the interest rate unchanged at 8.5% and sent a confusing signal to the market, which expects the MPR to continue falling.

Lastly, the fact that it is a election year It is not a minor issue, with the agents evaluating the government programs of the pre-candidates, the tone of the campaign and the possible consequences on the autonomy of the BCU depending on who governs.

Source: Ambito

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