Impact of Fertilizer Supply on Inflation

Third, a third of the

fertilizers is shipped through

the Strait of Hormuz.

Now, that is also at risk.

And it matters particularly in the southern hemisphere where the planting

and therefore the fertilizers is badly needed now.

I'm not saying that just out of interest for agriculture.

Don't forget I was Minister of Agriculture in France for a month and a half.

But because it matters to me as a central banker now.

Because if the price of food increases significantly,

it is not going to just be the price of food.

It is going to be inflation expectations.

Because we know that people are particularly attentive to two things.

The price of food, processed and unprocessed,

and the price of gas at the petrol station.

So, here are three indirect consequences

of what's happening in the energy world.

So, if the disruption persists long enough,

the adjustment shifts from prices,

which we are putting up with now, to possibly rationing

with very different economic consequences.

Higher prices are primarily inflationary.

Shortages hit output directly and are worse for growth.

Overall,

there have been so far limited

signs of supply chain disruption,

both globally and in the euro area.

But local tensions are visible.

Jet fuel prices have roughly doubled

since the outbreak of the conflict.

And rationing has been imposed at some individual airports in Europe

since early April.

And I'm not talking about what's happening in the rest of the world.

I'm just back from the IMF and the World Bank spring meetings, like many of you.

And you might have bumped into colleagues from Asia,

in particular some of the low income countries or emerging market economies,

that are taking a much more severe hit than us and are moving into rationing.