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Most parts of the world are experiencing a dramatic inflationHowever, despite rising energy costs, strong consumer demand, and the disruption to global supply chains caused by Covid-19 and its latest variants, leading to price increases, many central banks have maintained interest rates at or near historically low levels.
Some people worry that this combination may mark the general return of long-term inflation in the 1970s.The only one exception The pattern of rising prices worldwide is in East Asian countries such as China and Japan. But even here, there are signs that inflation is beginning to rise.
This page provides a regularly updated visual narrative of current and next year global consumer price inflation. *It also divides inflation into its main components; what rising food prices mean to consumers; and where investors think inflation will go in the medium term.
One of the main issues of debate between policymakers and economists is whether price increases are temporary, will fade soon, or may be more permanent.
However, even those who believe that as supply chain problems ease and consumer demand stabilizes, inflation will fall next year, admit that the inflation shock will last longer than originally estimated. Economists surveyed by Consensus Economics have steadily raised their expected inflation data for 2022, and the company is responsible for collating the forecasts of leading forecasters.
Rising inflation poses a challenge to central banks, especially those G7 countries that have set a price stability target of 2%. To achieve this goal, the central bank can adjust monetary policy to curb demand. But such tools are less effective in dealing with inflation caused by insufficient supply. As Andrew Bailey, Governor of the Bank of England, put it, monetary policy “will not get more gasoline, more computer chips, more truck drivers”.
The rise in energy prices, which drives inflation in many countries, is a good example. One obvious sign that inflation may start to spread beyond energy is that the prices of many other commodities are also rising—especially in countries where consumer demand is strong enough for companies to pass on higher costs.
Rising prices limit household spending on goods and services. For less affluent people, this may make them unable to afford basic needs such as food and shelter.
Daily data on major commodities, such as the wholesale prices of breakfast ingredients, provide the latest indicators of the price pressure consumers face. In developing countries, the wholesale cost of these raw materials has a greater impact on final food prices; food also accounts for a larger share of household expenditures.
The debate over whether the inflation spike is temporary or longer-lasting continues. Proponents of “Team Short” believe that this year’s price surge is due to a one-time surge in consumer demand that conflicts with a one-time increase in supply chain disruption. Proponents of “Team Residency” point out that the pattern of price increases is expanding, especially in countries where labor shortages are pushing up. salary.
At the moment, the market seems to be on the side of “staying the team”, and in many countries, the inflation rate will rise in the next five years.
*Consumer inflation refers to the annual percentage change in the consumer price index of each country. The data is internationally comparable, although some countries and regions use different headline numbers. For example, the Eurozone uses its unified consumer price index as its headline data and also reports CPI.
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