Although the war in the Middle East is far from the Danish border, its derivative effects can be felt here at home. Energy prices have skyrocketed as a result of the conflict, and this is helping to drive up inflation.
In April, the annual increase in consumer prices was 1.4 percent, according to a new report from Statistics Denmark. In March, the increase was 1.2 percent. The same for both months is that higher fuel prices are driving the higher inflation.
And it is not certain that we have reached the peak yet. That is the opinion of Erik Bjørsted, chief economist at Dansk Metal. He also estimates that "in the worst case scenario" it could affect the purchasing power of Danes.
- Wages are continuing to rise nicely, and if inflation stays around two percent, there is still a prospect of real wage growth. However, the progress will be less than expected at the beginning of the year, he writes in a comment.
- At the same time, uncertainty is great, and if the war drags on, real wages may begin to fall again, as happened in 2022.
Real wages refer to what employees actually get out of their income. If real wages increase, consumers can get more for their wages than before. The opposite is true if real wages fall.
In February - before the war in the Middle East broke out - inflation was 0.7 percent in Denmark, so the rate of increase in consumer prices has now doubled since then.
The latest statement for April confirms Brian Friis Helmer, a private economist at AL Sydbank, that there is probably a prospect of higher interest rates.
- We expect the European Central Bank (ECB) to come out with an interest rate increase as early as their next meeting in June, he writes in a comment.
If that happens, it will, among other things, make housing financing more expensive for many Danes with variable-rate mortgages.
/ritzau/
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