By Isaac Cohen*
There is evidence of a decrease in some of the bottlenecks that are generating price increases and justifying concerns about a spike of inflationary pressures. A recent paper by the staff of the Bank for International Settlements, “the bank of the central banks,” concluded that the effect of these bottlenecks “on inflation is likely to be temporary.”
For instance, energy prices are among the most inflationary and oil prices increased a week ago to over $70 per barrel. However, over the weekend, the members of the Organization of Petroleum Exporting Countries (OPEC) and some non-members, led by Russia, agreed to gradually increase production, to restore the reductions made during the pandemic. The agreement will increase production by 400,000 barrels per day each month, until the end of 2022. Over the weekend, just the expectation that the agreement could be reached pushed down oil prices to around $65 dollars per barrel.
Similar price decreases are expected on other commodities, despite stronger demand from China, the United States and other advanced economies. By contrast with the role played in 2008, during the aftermath of the Great Recession, this time China is selling some state stockpiles of several commodities, such as aluminum, copper and zinc, to moderate price increases. On July 6, the National Development and Reform Commission, in charge of China’s commodity reserves, declared “We will continue to organize releases of state stockpiles in the near future to ensure the stable operation of the market.” (The Wall Street Journal 07/19/21).
*International analyst and consultant, former Director ECLAC Washington. Commentator on economic and financial issues for CNN en Español TV and radio, UNIVISION, TELEMUNDO and other media.