Food prices may continue to rise due to price adjustments following inflation

It seems logical for a company to track inflation, but it raises a number of questions. Didn’t the service providers plan for the year 2023 in such a way that they took into account the expected economic processes? Did everyone miscalculate, or was the level of the increase in price unforeseen, and now an additional correction will take place? If all companies consistently implement a 15 percent increase, doesn’t that jeopardize the 4-5 percent inflation expectation this year?

In 2024, this topic became particularly relevant, as the annual inflation rate was exceptionally high compared to previous years. It is therefore worthwhile to examine and explain the phenomenon from two different perspectives. In a typical competitive market approach, for example, employers often raise workers’ wages at the beginning of the year in order to prevent them from losing purchasing power. In this case, the employees bear the inflation risk during the year, but the employer corrects this at the beginning of the following year.

On the other hand, expenditures related to the state budget, such as pension increases, are usually determined in terms of the expected inflation, not the last year’s inflation. If it turns out at the end of the year that this was insufficient, a subsequent correction is made. The fundamental difference between the two approaches is that one is regulated by market conditions and the other by legislation.