Russia’s invasion of Ukraine has caused inflation to stubbornly consolidate in countries around the world. Prices rose last year due to a supply chain barrier, Covid-19-related downtime and rising energy costs – problems that were expected to weaken in 2022. Six months ago, the Organization for Economic Co-operation and Development (OECD) estimated that almost none of its 38 members would see inflation rise above 6%. The main exceptions were Turkey and Argentina, which were already experiencing subdued inflation that is largely unrelated to the pandemic. Since then, sanctions against Russia, one of the world’s leading producers of energy and grain, have pushed up food, fuel and fertilizer prices. Russian bombings, blockades and seizures have halted the flow of grain from Ukraine, another leading producer, increasing the range of famine in the poorer food-importing countries. At the same time, China’s policy of locking out Covid-19 cases has exacerbated the problem. This week, the OECD announced disappointing updates. In seven Eastern European countries, inflation is now expected to double-digit. The estimated rate for the Netherlands has almost tripled to 9.2 percent this year. Australia doubled to 5.3%. And like the United States, Britain and Germany have seen inflation hit a four-decade high, well above expectations. This is likely to devour household incomes and savings, while delaying companies’ efforts to invest and create jobs. Central banks in the United States, Britain, Australia and India have recently moved aggressively to curb rapidly rising prices by raising interest rates. Even the European Central Bank, which was reluctant to raise interest rates for fear of a recession, said on Thursday it would cut asset purchases and raise its key interest rate by a quarter of the unit at its meeting next month. and probably even more so. In September. But there is a limit to what political and economic leaders can do to increase inflation – especially given the variety of causes. In many areas, such as Europe, inflation is due to significant increases in food and energy prices. Rising interest rates will not solve the underlying supply problems, the OECD has warned. Instead, the agency partly blamed inflation in the United States on “excessive demand,” which is more in line with tighter monetary policy. Compared to Europe, the US labor market is tighter and nominal wage increases are higher. Although inflation is causing severe pain in some areas, the long-term outlook is more positive. The World Bank expects global consumer price inflation to fall below 3% next year.
