ECB struggles to ease consumer perception of high inflation

Section:

By Martin Arnold
Financial Times, London
Sunday, January 19, 2020

Sebastian Werner's family farm has had a weekly stall selling its apples, berries and honey beside the 1,000-year-old cathedral in the German town of Mainz since the 1970s -- but in the past few years he has noticed a worrying shift.

"I know almost all our customers here and some of the older ones stopped buying our produce after they retired, saying they can no longer afford it," he said. "Prices keep going up -- rents, petrol and electricity -- so they have less money to spend."

... Dispatch continues below ...



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Heidi Sohn, a butcher from just across the Rhine in Wiesbaden, agreed with him. "Prices are a bit too high -- rents are definitely too much," she said, adding that to afford somewhere to live she needed to move out of the city.

Ask anyone at the European Central Bank's headquarters 20 miles away in Frankfurt about inflation and they are likely to express frustration at its persistently low level. Yet at the Mainz farmers' market, many people think the opposite.

Prices shot up in shops and restaurants when the euro replaced the Deutsche Mark in 2002, said Ludwig Kloster, a baker from the nearby town of Bad Kreuznach, adding: "The cost of living is still going up." He aims to retire to Latin America, where "things cost half as much."

In recent years eurozone consumers have consistently believed inflation in the bloc to be much higher than it actually is. Households thought annual inflation averaged close to 9 per cent between 2004 and 2015, according to a European Commission survey. ...

... For the remainder of the report:

https://www.ft.com/content/39b474d4-379b-11ea-a6d3-9a26f8c3cba4

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