Just as in the United States, politicians in other countries are caught unprepared by persistently high inflation. Rising prices were expected to slow as economies recover from the pandemic, but rising energy and food prices continue to boost global inflation.
After Russia invaded Ukraine, forecasts for the future of inflation were torn and reset much higher in light of rising commodity prices. The war has raised concerns about the stability of Russia’s energy supplies, which are crucial for Europe, and disrupted food production, raising the risk of a global hunger crisis. Meanwhile, supply chains remain burdened by pandemic disruptions, and demand for some goods is still stronger than production can handle.
High inflation rates are widespread: among the United States, the eurozone and other so-called developed economies, 60 percent of countries have annual inflation rates above 5 percent, according to the Bank for International Settlements, a bank for central banks. This is the largest share since the 1980s and a serious problem for central banks, which usually target inflation at 2 percent. In emerging economies, more than half of countries have inflation above 7 percent, the bank said. So far, China and Japan are notable exceptions.
“We may be on the verge of a new inflationary era,” said Agustin Carstens, the bank’s chief executive, last week. “The forces behind high inflation may continue for some time.
After more than a decade of central banks in the United States and Europe trying to raise inflation to their targets and keep it stable, politicians are suddenly struggling to tame it. Energy and food prices are often volatile, but what worries central bankers is rising prices spilling over into other goods and services, followed by workers who want higher wages to cope with higher wages. cost of living.
In the UK, inflation is at its highest level in three decades. Prices rose 6.7 percent in March from a year earlier, according to economists polled by Bloomberg, expecting data released on Wednesday to show. The Bank of England has already raised interest rates three times since December to pre-pandemic levels amid growing evidence that companies are responding to rising prices with higher wages.
In the euro area, annual inflation jumped to 7.5% in March from 5.9% a month earlier. Higher energy prices are the main driver of inflation there, with far fewer signs of a significant increase in wages. But the European Central Bank has launched a plan to end its large-scale bond-buying program to pave the way for rising interest rates as “inflation becomes wider and more resilient”, according to its latest political report. meeting. Politicians will meet again this week.
Even in Japan, which has struggled with very low or negative inflation rates for decades, there are signs that higher prices are reaching its shores. Last month, a government survey of one-year consumer inflation expectations rose to 2.7 percent, the highest level since 2014.