Such specialization fosters trade.11 Trade, especially intertemporal trade--that is, the trade of goods and services today in exchange for goods and services at some future date--tends to give rise to a range of surpluses and deficits across individuals and nonfinancial businesses. And in all likelihood those imbalances have been increasing faster than income.
Higher non-core inflation penetrates economy in different ways (i) it impacts consumer purchasing powers since cutting down essentials is difficult and there is low price elasticity of food and energy, (ii) even if the Government delays the direct pass through of energy prices to consumers, businesses often pass through immediately higher costs of energy on to their consumers, and (iii) with inflationary trends persisting consumers and producers higher inflationary expectations set in trends too.