The world’s major economies are marching high, recording their first price surge in decades. International oil prices soared due to the Russian invasion of Ukraine, and the risk of invasion was reflected in the economy as a whole.
The UK’s National Statistical Office said on the 13th (local time) that consumer price inflation rose to 7.0% in March, the highest level since March 1992. It was higher than the forecast of experts gathered by Reuters (6.7%).
In the eurozone, the 19 member countries that use the euro, consumer price inflation rose 7.5% in March, the highest on record. In the case of Germany, which supports one axis of the European Union (EU) economy, it was 7.3%, the highest in more than 40 years since November 1981 (West Germany standard) of 7.3%. Spain’s preliminary estimate of inflation for March was 9.8%, the highest in 37 years since May 1985.
The U.S. consumer price index (CPI) rose 8.5% in March, which was announced the day before, the highest since December 1981 in more than 40 years. Korea’s consumer price inflation rate in March was 4.1%, recording the 4% level for the first time in 10 years and 3 months since December 2011 (4.2%).
The same is true of emerging countries. According to the Bank for International Settlements (BIS), in more than half of emerging markets, inflation rose more than 7%. Argentina and Turkey account for over 50%, Brazil at 11.3% and India at 6.95%.
Inflation began to rise last year as economic activity gradually resumed after the COVID-19 outbreak. Then, on February 24, when Russia invaded Ukraine, international oil prices soared and sparked an increase in inflation.
The price of West Texas Intermediate (WTI) crude oil (WTI) from the United States peaked last month and has been stabilizing, but this year it is rising by 35%. As a result, energy prices, such as oil, jumped 32% in March in the United States as well. “In particular, the price of gasoline rose 12.6 pence per liter from the previous month, the largest increase since 1990,” said an official from the British Statistical Office.
The soaring inflation has now gone beyond raising the burden of living expenses a little, and has reached a level that is financially strangling, the BBC said. In particular, as Ukraine, the world’s breadbasket for wheat cultivation, became embroiled in war, food prices rose.
Andrew Shelley, head of British wholesaler Bead Foods, said foods containing wheat, sunflower oil, chicken and white fish were also particularly affected. “I’ve been in the food wholesale business for 30 years, and this is the first time I’ve seen prices of all products go up like this,” said Selly. “The cost will eventually be passed on to consumers.”
Prices are rising in all directions, so there seems to be no way to avoid the shock, the BBC pointed out. Moreover, there are many predictions that prices will rise further and this will hurt the economy. In the UK, starting April 1, household energy prices have risen by an average of 54%, and some taxes have also risen. The Office for Budget Responsibility (OBR), an independent agency of the UK government, forecasts inflation in the fourth quarter to reach 8.7%, the highest in 40 years.
Germany’s major economic research institutes have lowered their growth forecasts from 4.8% to 2.7%, expecting inflation this year to reach 6.1%, the highest in 40 years, in a joint report released on the 13th, dpa reported.
The government and central bank are tightening money lines by raising the base rate and taking measures to alleviate the immediate pain by lowering the fuel tax. The US is said to be likely to raise interest rates by 0.5 percentage points next month.
Louis Federal Reserve Bank President James Bullard said in an interview with the FT: “It is an illusion to think that the Fed will be able to cut inflation low enough without raising interest rates.” The Bank of England also raised interest rates three times in a row and is expected to raise rates again in May.
The Reserve Bank of New Zealand raised interest rates the most in 22 years, and the Bank of Canada is also expected to decide to raise rates by 0.5 percentage points. The Bank of Korea is also likely to raise interest rates on the 14th.
In the financial markets, the European Central Bank (ECB) is expected to maintain the base rate at the monetary policy meeting on the 14th. However, there are growing calls to respond to inflation. Germany is offering a €4.5 billion tax cut for commuters and others, while Spain has agreed to cut fuel prices by 20 cents per liter.
“The government has to add support because the pressure on households from inflation is so great,” said Jack Leslie, senior economist at the Resolution Foundation, a British think tank.