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13 NEWS maltatoday | SUNDAY • 12 JUNE 2022 concerns published today. The cost of living, particularly food inflation, has jumped up to the top spot of concerns, more than doubling since March. The consolation for Maltese consumers is that they have been spared the impact of higher fuel and energy prices as a result of government's intervention to cushion the blow. Millions of euros in taxpayer money are be- ing spent to keep electricity rates and pump prices stable. But the rise in prices for raw materials and essential food- stuffs is also worrying restaura- teurs. Three in four industry re- spondents in an online survey by the Association of Catering Es- tablishments (ACE) have com- plained about the increase in stock pricing seriously hindering the sustainability of the industry. "When assessing the survey holistically, it is evident that sustainability is the major issue of concern and this is attribut- ed mainly to the impact of the COVID-19 pandemic togeth- er with the sudden spike in the stock purchase pricing index as well as the recurrent problem of human resources," ACE said when it released the findings on Friday. Wage pressures Inflation will create pressure on employers to increase wages. The Retail Price Index, which is used as a benchmark to calculate the mandatory increase in wages and pensions every January, was showing an annual increase of 5.7% in April. The main drivers behind the April increase were house maintenance costs and food. At this rate, wages are very like- ly to increase anything between €6 and €8 per week next January, which will provide a tardy re- prieve for workers and pension- ers but could erode profitability in certain sectors still struggling to recover from the pandemic. The European Central Bank (ECB) announced last week its intention to raise interest rates for the first time in more than 11 years next month as it tries to control soaring inflation in the eurozone. The ECB said it would raise its key interest rates by 0.25% in July, with further increases planned for later in the year. It also intends to end its bond-buy- ing stimulus programme on 1 July. The latest eurozone inflation estimate was 8.1%, well above the ECB's target of around 2%. The ECB's main policy interest rate is currently at -0.5%, which means banks pay a fee to keep their deposits with the central bank. The interest rate could be back at zero or above by the end of September, the ECB said. Raising interest rates makes borrowing more expensive while it encourages consumers to save rather than spend. This will re- duce wage growth and curb in- flation but some economists have warned this could stifle in- vestment and economic growth at a time of fragile recovery. Inflation, growth and stir fry Economist Clint Flores had been hoping the ECB will stave off interest rate hikes to avoid the impact on economic growth. In comments on his Facebook page dedicated to economic and political analysis he did not hide his disappointment with the ECB's announcement. "It is something I did not wish to happen [the ECB interest rate hike]. But it did. I hope it does not create a problem of lack of private investment because the problem [inflation] is coming from the supply side and not one caused by demand," Flores wrote. Inflation is primarily caused by high energy prices and supply chain disruptions, whether as a result of war or pandemic-in- duced port closures in China, things the ECB has no control over. In a policy lecture hosted at the Goethe University on 25 May, Fabio Panetta, an ECB executive board member, noted that un- like some other advanced econ- omies, the euro area is not facing a situation of excess domestic demand. "Instead, the euro area is con- fronted with a war on its door- step that comes on top of a se- ries of negative supply shocks generated abroad. These shocks – above all the increase in ener- gy prices – are creating sizeable and persistent upward pressures on near-term inflation," he said. However, by hitting real in- comes, confidence and ul- timately domestic demand, these shocks could derail the post-pandemic recovery, Panet- ta added. "For now, given the exceptional level of uncertainty we face, we should normalise our monetary policy gradually, in line with the progressive adjustment that has inspired our action in recent months," he told his audience. That is what the ECB will start doing from next month as it seeks a balance between the more hawkish central bankers hankering for a much higher in- crease in interest rates and the more prudent ones demanding a slower approach not to disrupt growth. It is unlikely that the ECB's move will lower the price of vegetable oil bought at your lo- cal supermarket anytime soon. For the foreseeable future, the homemade stir fry will continue frying your purse. EU trade data for February 2022, released just before the war in Ukraine started, shows prices of cereals and feed for animals increased by 29.4% and 22.2% respectively, putting upward pressures on prices of cereals and meat in Malta Ukrainian government soldiers sit on an armored vehicle as they take up a position in a sunflower field around 12 miles south of Donetsk