The governor of the Bank of Spain predicts in Pamplona that prices will continue to rise

The Governor of the Bank of SpainPablo Hernández de Cos, has affirmed that the effects of the war in Ukraine they are going to suppose “an additional increase in inflationary tensions” and he has advanced that in March a “particularly negative” data is going to be registered, a very significant rebound in inflation.

During his speech at an informative breakfast organized by Institución Futuro in Pamplona, Pablo Hernandez de Kos has assured that the war in Ukraine “is generating a kind of energy shock” and has warned that the markets expect prices to remain highalthough perhaps not at current levels, it is more than the values ​​of a year ago.

The governor has claimed that the war affects the economy in several channels. Among them he mentioned raw materials, an area in which above all Russia but also Ukraine are producers, especially of energy raw materialson which Europe is also “very dependent”. “This greater dependency generates a price increase that negatively affects the economy“, he explained, although he specified that, although the European economy is highly dependent, “the Spanish economy is not one of the most dependent”.

In any case, Hernández de Cos explained that this situation “is going to mean an additional increase in inflationary tensions” and has advanced that in March a “particularly negative” data is going to be recordeda very significant rebound in inflation”.

The Governor of the Bank of Spain has cited the financial channel as the second channel, pointing out that “the financial sector exposures were low and we thought that -the effects- in that channel could be reduced”. Hernández de Cos explained that in the evolution of the stock markets there has been “a very important increase in volatility, in uncertainty, a fall in the stock markets, which have however partially recovered”.

The governor has added that the effects of the war are also perceived in the commercial channel. “Beyond energy products we have trade relations with Russia and Ukraineand what we expect from the war itself and from the sanctions against Russia is that the Russian economy will deteriorate and obviously if we have trade relations with that country it will also affect it. Trade relations -with Russia- are limited, we expected that -the effect- in this channel would be small, but the global value chains introduce a lot of complexitywhich could indirectly have effects”, he pointed out, exemplifying that “an increase in delivery times” is already taking place.

Lastly, he quoted the channel Confidence, warning that a “brutal increase in uncertainty has been generated and uncertainty is not good for making investment and consumption decisions, they withdraw and generates less economic activity“.

On the impact this will have crisis over economic activity and prices in the coming years, Hernández de Cos has stated that “we know the direction of the effect but there is a lot of uncertainty about the impact because we do not know the duration of the disturbance, of the war, and of the sanctions that have been established against the Russian regime”.

In any case, he did point out that the crisis by 2022 “will generate a negative effect on economic growth and increase inflation” and explained that, according to different scenarios, the reduction in growth over the baseline scenario will be between 0.5 and 2% and the increase in information could rise between 2 and 4%.


Likewise, the Governor of the Bank of Spain, Pablo Hernández de Cos, advocated this Tuesday for a income agreement between workers and employers with the aim of preventing “feedback” from “high inflation”.

Hernández de Cos stated that “the essence of the pact is to admit that the country is poorer than it was a few months ago, because there are a series of energy products that Spain does not produce but that it needs to produce the rest of the goods and for final consumptionand those products today are more expensive”.

On the other hand, regarding the increase in the Interprofessional Minimum Wage (SMI) agreed by the Government and unions, Hernández de Cos has assured that, “having positive effects on wage inequality, negative effects can be generated on certain groups” and has argued that these negative consequences could be registered when it occurs “above of individual productivity.

For example, it has pointed out that these negative effects are more likely to occur in the field of young workers and has explained that once the decision to increase the SMI has been adopted, action must be taken on the active employment policies to improve the training of these workersin order to improve their productivity. “There has to be coherence in economic policies related to the labor market,” she said.