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Index-linked rise in benefits, pensions and public sector pay to come earlier than expected

Inflation in Belgium reached 2.73% in August. The higher-than-expected level of inflation means that the mechanism that is in place to maintain the purchasing power of those on pensions and benefits as well as those employed in the public sector will be activated and that all these groups can expect their gross income to rise by 2% in the coming months. Those in private sector jobs will see their wages rise according to the rate of inflation sometime later.

August was the 7th consecutive month during which the rate of inflation rose. At 2.73% inflation in August 2021 was at its highest rate since March 2019. The relatively high rate of inflation has meant that the mechanism to raise the level of pensions benefits and public-sector wages by 2% has been activated two months earlier than had been previously predicted by the Economic Planning Bureau.

The level of pensions and benefits will be increased by 2% in September with those working in the public sector getting a 2% pay increase from October. In the private sector an index-linked pay increase will become effective later than this. When this will be is dependent of the collective labour agreement that is in force in a particular sector. Some sectors of industry increase wages to match inflation at a set date once a year. Others do this monthly or quarterly.

Increased energy prices force up inflation

The motor behind the rise in inflation is an increase in energy prices. For example, the price of gas is up 49.4% on a year ago. Some of the rise in gas prices can be explained by the fact that this time last year the price of gas was extremely low due to the coronavirus crisis. Nevertheless, prices are currently above what they were the last time the price of gas peaked in 2018.

Electricity is also more expensive. Currently the price of electricity is at its highest ever level.  

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