Inflation is accelerating and has surpassed the 5 percent mark. The State Bureau of Statistics has announced that it stands at 5.5 percent. We are now in a dangerous zone because once prices rise, it is very difficult to reduce them. The executive and monetary authorities are asleep. I fear that even the current affair involving the Croatian National Bank does not contribute to curbing inflation. It seems that only the problem of inflation can awaken them from their slumber if the disconvergence around inflation delays the introduction of the euro. Let us remind ourselves that our inflation should not exceed 1.5 percent of the average inflation rate of the three European Union countries with the lowest inflation. This is pure flattery to the European Union at the expense of the concern for the standard of living of citizens, which has drastically declined.
Preventive measures should have been implemented when the inflation growth rate was between 2 and 3 percent. Now we can rightly ask what the Croatian Productivity and Competitiveness Committee, established by the Government in 2020, or the Economic Council of the President, is for. Inflation is an economic problem and requires economic solutions.
There are two solutions. The first solution is a government measure to reduce food prices. A digital marketplace should be established or the existing one called Tržnica.hr should be utilized. The goal would be to enable the distribution of cheaper food from rural areas to cities. Food is still cheaper in rural areas. The role of food distribution can be taken over by the Croatian Post, which has its post offices and distribution channels in all villages. This way, the cost of food in the consumer basket would be reduced, which is particularly important for the most vulnerable groups of citizens with lower incomes. The second solution is to reduce the money supply, i.e., to turn to a restrictive monetary policy to influence demand (reduce the supply of credit, increase interest rates) until prices in the market are corrected again. This is done through open market operations or reserve requirement rates.
