Wifo boss Felbermayr warns: “We will still see higher inflation”

Felbermayr recalled mistakes from the high inflation phase of 2022. “Letting inflation rush through in 2022 would be a bad idea, that was a mistake back then, that shouldn’t happen again.” Clarity that the state does not accept every price level is fundamentally positive.

Doubts about implementation

Felbermayr is particularly critical of the planned interventions in profit margins. It remains to be seen exactly where regulation should take place. “We can hardly regulate foreign price ranges.” Domestically, a lot lies with OMV, and discussions will have to be held there.

He warned against rigid cost-margin models. “The experience in other industries that people say, here are the costs and then there should be a margin of x percent, is not incredibly good.” Companies would then have little incentive to reduce costs.

Lessons from abroad

A fixed price cap is more problematic than a flexible margin intervention. Hungary has shown where this can lead. “In Hungary this led to problems at the petrol pumps, where the petrol ran out.” In Slovakia too, there are side effects from low prices that trigger fuel tourism.

The Austrian solution could curb inflation, but only to a limited extent. “So some, maybe 0.2 percentage points of inflation will dampen that, but we’ll still see higher inflation.” According to Wifo, without measures, inflation would have been around 3.1 percent, with a price brake it would have been closer to 2.9.

War as a great risk

The consequences of an escalation in the Middle East would be much more dramatic. “We have about 20 percent of global crude oil supply that has to go through the Strait of Hormuz.” A blockade would have massive price consequences, including a doubling of oil prices.

Felbermayr no longer expects inflation rates like those in 2022. “No, no, I don’t think so.” Austria has learned lessons, for example with strategic gas reserves and faster political intervention. However, he also appealed to politicians that the focus should have been on renewable energies years ago in order to become more independent of war.