Why EC Prices Will Only Continue to Go Up Despite Rising Rates

Despite rising interest rates and high energy prices, European EC prices will continue to go up. Commodities play an important role in the production and distribution of a wide range of goods and services. A market correction mechanism is in place to help offset excessively high prices.

High energy prices

Despite a rebound in prices, gas and electricity costs will continue to rise. The cost of these commodities is primarily determined by basic supply and demand factors.

The recent war in Ukraine and its ensuing sanctions have increased the pressures on energy prices. Natural gas prices have surged, and gasoline prices are more than double what they were a year ago.

In the United Kingdom, household energy prices are subject to a cap. But that isn’t enough to protect the nation’s vulnerable families. The cost of home heating is expected to increase by 17.2% from last year.

More than 20 million families are behind on their utility bills. And if energy costs continue to climb, millions more will be at risk.

The average cost of home heating is expected to rise to $1,202 from last winter. That is the highest price in more than a decade.

The price of electricity is expected to rise to $0.1524/kWh in 2023. That would be about 3.3% higher than the average price in 2017.

But the increase in energy costs won’t bode well for economy-wide inflation. The United States is already facing a slowing in economic growth, which will mitigate the impact of supply constraints.

Commodities affect the production and distribution costs of a wide range of goods and services

Whether you are a consumer or a producer, commodity prices play a significant role in determining the production and distribution costs of a wide variety of goods and services. Depending on your perspective, reading commodity-price patterns can be both easy and difficult.

While many economists view commodity-price increases as a precursor to general inflation trends, others believe that recent pressures have little or no impact on core inflation measures. If monetary policy remains accommodative, recent pressures will remain in place, but may eventually spill over into other prices.

Commodity-price increases make sense in light of recent economic events. For example, oil prices have recently increased due to Middle East turmoil, which has disrupted oil supply. As prices rise, demand for fuel can increase supply. However, because the price of oil is not directly related to inflation, it is difficult to make a direct comparison between relative-price changes and inflation.

In a market economy, relative-price changes are important because they convey information about the availability and scarcity of a particular good or service. This information is useful for efficient allocation of resources.

Market correction mechanism to offset excessively high prices

Despite the hype around the recent European Central Bank rate hike, prices are still on the rise. There are a number of reasons for this, including the aforementioned rate hike, droughts, and a spike in oil prices. These factors have put a dent in the ol’ economy. EC officials have vowed to do something about it. If all goes according to plan, the eurozone may have a shot at an emergency summit in early November. The main focus of this gathering will be on identifying and resolving the cause of a number of recent price spikes. However, that isn’t to say that there won’t be some talk of more mundane matters at the table.

While the EC has yet to unveil a complete plan, the energy community has been quick to pick out the holes in the batting order. There is still plenty of work to do, and it’s best to take a page out of the EC’s playbook, and take the initiative to improve the European energy balance.

Housing costs have increased in 24 out of 27 member states since 2010

Despite rising rates, housing costs have increased in 24 out of 27 EC member states since 2010, according to the latest European Commission research. This indicator captures the share of the population experiencing basic deficits in housing, such as damp floors, rot in window frames, and a leaking roof.

The highest rates of housing deficits were reported in southern and eastern European countries. Portugal was the highest, with one in four households suffering from a deficit in 2015. Cyprus had the second highest rate, with a difference of 9.2 percentage points. In 2015, the rate for poor people was 3.5 percentage points higher in Malta. In Greece, the rate was exceptionally high, at 40.9%.

The housing cost overburden rate is the share of the population spending more than 40 % of their disposable income on housing. This ratio is calculated by multiplying the nominal house price index by the nominal disposable income per head in each country.