AUS
NZ
UK
CA
USA
IND
Highlights
- The Consumer Price Index (CPI) for a large variety of goods and services across most countries is climbing faster than expected.
- The primary causes for such a high price level are the skyrocketing prices of oil and gas and supply-chain disruptions.
- Few economists suggest that the high level of inflation would slide by the end of 2022 as the supply-chain barriers would east out by the end of the year.
Recently, all news headlines have been flooded with the latest US data of a massive increase in CPI. The USA, the largest economy in the world, has multi-dimensional effects on several other economies. The persistent disturbances in the supply-chain management in the pandemic have been one of the most significant causes of high degree inflation in the US and other nations.
A substantial number of advanced and emerging economies are experiencing high inflation. As this was supposed to be the recovery period, it was expected that the world economy would experience inflation. However, the Consumer Price Index (CPI) for a large variety of goods and services across most countries is climbing faster than expected.
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The USA
The Biden administration seems to be under immense pressure, especially after the latest CPI figures were released. The report showed that the index rose at 7.5% over the year and 0.6% in the past month. This is the highest inflation experienced by the US economy for the past 40 years. The worrying factor is that the price is now not rising for only pandemic affected goods but other commodities as well. Consequently, citizens are becoming pessimistic, and the consumer baskets are shrinking.
Many investors are now presuming that the Federal Reserve might increase the interest rate to curb the high inflation rate. However, raising the interest rate may contract the demand, and thus the revival journey might be hampered.
Meanwhile, few economists suggest that the high level of inflation would slide by the end of 2022 as the supply-chain barriers would east out by then. However, some suggest that such high inflation may leave long-lasting impacts on the US economy; thus, the central bank and policymakers need to take stringent steps.
Sources: © Alphaspirit | Megapixl.com
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Eurozone
The 19 nations that use the Euro currency are sailing in the same boat as the USA. The prices have been increasing at a substantial rate consecutively for the past three months. In January, the annual inflation accounted for 5.1%; in December it was 5%, and in November- it was 4.9%. These inflation rates have broken all records since 1997, since when the inflation rates are being recorded.
The primary causes for such a high price level are the skyrocketing prices of oil and gas and the supply-chain disruptions. The oil prices have spiked in the global economy; however, natural gas prices have increased in Europe due to a couple of different reasons like depleted winter reserves, low supply from Russia and the military moves against Ukraine. The European Central Bank recently had a meeting, and it seems like the Bank is not going to increase the interest rate this year in order to curb inflation.
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New Zealand
New Zealand is not far behind the rally of high inflation countries. The nation experienced a massive increase of 5.9% in the consumer price index in 2021. According to Stats New Zealand, the rate has broken all records of the past 40 years. Several economists suggest that the high inflation might not be mere “transitory” but “persistent”. The leading cause of the price level changes is affected by the massive increase in inflation in the USA and the worldwide supply-chain disruptions. Investors in the country are worried about protecting and growing their wealth in these times of high inflation.
Australia
Australia’s consumer price index rose at 3.1% in 2021, which was the highest since 2011. The cost of living is getting expensive in the country, which is the most worrying aspect for Aussies. Fuel has seen the most significant price rise, followed by the prices of food products. Now, people speculate whether the RBA would increase the interest rates followed by rate hikes by the US banks. However, some experts suggest that investors shouldn’t worry much because Australia’s inflation rate is nowhere as worse as the USA’s. Thus, the country may or may not experience a substantial rate hike.
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Bottom line
Like Omicron, high inflation is also spreading across countries like a virus. Countries are finding it challenging to fight strong inflationary pressures. The situation is tough as simply raising the interest rate to curb the inflation might not help the cause as that would limit the demand as well, which is crucial in the recovery period. Thus, it is interesting to see how the central banks across the world would tackle high inflation in the coming months.
