When will the high fever of global inflation subside?

(2022·World Question) When will the high fever of global inflation subside?

　　China News Agency, Beijing, December 22. Question: When will the high fever of global inflation subside?

　　China News Agency reporter Zhang Chenyi

　　In June this year, the year-on-year increase in the US consumer price index (CPI) hit a 41-year high, in July the UK CPI hit a 40-year high, in October Turkey’s CPI hit a 24-year high, and South Africa’s CPI also rose to a 13-year high in July The highest level..."Inflation hit a new high" has become a high-frequency vocabulary in the field of international finance and economics this year.

　　According to the International Monetary Fund, people are experiencing high inflation that has not been seen in decades.

This not only has a profound impact on the prospects of economic development, but also is closely related to the daily life of the people.

Therefore, letting the high inflation fever recede as soon as possible is an important issue facing the current global economic development.

Feeling the Pain of Inflation

　　The International Monetary Fund predicted in October that this year's global inflation rate may be 8.8%, much higher than last year's 4.7%.

Inflation data is not a cold number, it is just like the skin, helping people quickly perceive the level of surrounding prices.

High inflation means that people need to pay more for living costs, and happiness is naturally squeezed.

　　National Public Radio reported that with the onset of high inflation, about 75% of American respondents said they had to cut spending in the past six months.

According to a recent survey conducted by Gallup in the United States, more than half of American adults believe that their families are facing financial difficulties due to rising prices.

　　Many developing countries are also plagued by high inflation.

Indian media quoted the survey results in May this year as saying that 92% of the Indian respondents indicated that their monthly household expenses had increased in the past three months.

According to inflation data released by the Indian government in mid-May, the cost of living for Indians is at its highest level in the past eight years.

"Inflation is an unwelcome guest in almost all Indian households, yet one has to 'entertain' it."

　　In October, Euronews quoted data from a Turkish survey agency as saying that more than two-thirds of Turks need to make more efforts to buy food and pay rent.

Higher price levels have also led to a surge in local debt.

　　From Haiti to Sudan, from Lebanon to Sri Lanka, soaring food prices are exacerbating local poverty and misery.

Exploring the Causes of High Inflation

　　International Monetary Fund economist Philip Barrett believes that rising food and energy prices are the main drivers of this round of high global inflation.

The New York Times published an article saying that the COVID-19 epidemic and the crisis in Ukraine have led to unsmooth related supply chains, and the increase in consumer demand in many countries has jointly promoted the rise in global inflation.

　　Reuters pointed out that since the Ukraine crisis, Western sanctions on major oil and gas exporters have led to further increases in energy prices.

"Barron's Weekly" believes that since Russia and Ukraine are important producers of agricultural products such as wheat and corn, obstacles to the export of these products will aggravate global inflationary pressures.

However, the unsatisfactory export of products such as palladium and titanium in related regions will easily push up the price level of specific industries in the world.

　　From a regional perspective, the main reasons for high inflation are not the same.

Jason Furman, an economist at Harvard University, believes that the recent high inflation in the United States is largely affected by rising consumer demand, while the high inflation in Europe is mainly driven by rising energy costs.

　　There is also a link between high inflation across regions.

Jonathan Munomo, a professor of economics at Salisbury University in the United States, said for example that the strengthening of the US dollar this year caused the corresponding depreciation of many currencies in Africa, especially the currencies of Egypt and Zimbabwe.

"This amounts to amplifying inflationary pressures across the continent."

Seeking a solution to both symptoms and root causes

　　Philip Barrett pointed out that curbing high inflation should be the top priority of policymakers now.

"There may be a higher economic cost if there is a delay."

　　If the money supply is regarded as the "cause" and the level of inflation is regarded as the "effect", then raising interest rates is a common tool to deal with high inflation.

Therefore, news such as the continuous interest rate hikes by the Central Bank of Mexico, the Federal Reserve and the Bank of England have frequently appeared in the newspapers.

　　Some voices pointed out that interest rate hikes always have a moderate style, usually hoping to achieve a "cooling" of inflation under the premise of avoiding large-scale corporate bankruptcy and a surge in unemployment.

But there are also views that countries should be cautious about raising interest rates, because exceeding a certain level may trigger an economic recession.

The World Bank has previously warned that the risk of a global recession in 2023 has risen as central banks raise interest rates simultaneously to combat high inflation.

　　In addition to recommending correct fiscal policies, monetary policies, and continuous promotion of structural reforms to increase productivity to deal with high inflation, the International Monetary Fund also emphasizes the important role of multilateral cooperation.

　　Global high inflation has a common "cause" and multilateral cooperation is the "prescription" for it.

Whether it is to overcome the negative impact of the new crown pneumonia epidemic on mankind, or to minimize the risk of geopolitical conflicts, global multilateral cooperation is a way to solve both symptoms and root causes.

As Georgieva, President of the International Monetary Fund, said earlier, in the face of high inflation and other problems that impact the development of the global economy, it is crucial to strengthen multilateral cooperation.

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