Inflation in Europe and the World: Stunning Data Reveals a Looming Major Crisis | World | New

Cost of living: why the Bank of England raised interest rates

Inflation has reached its highest level in decades in many countries following Russia’s invasion of Ukraine, driving up energy and food prices. With the UK setting an inflation peak of 13.3% expected in October, a number of international peers have seen price pressures ease over the past month. As central banks around the world raise interest rates as a countermeasure, fears of recession have taken hold.

Inflation – the rate at which prices rise – hit a 40-year high of 9.4% in the UK in June.

Last week, the Bank of England (BoE) announced that the rate could reach 13.3% in October when the cap on energy prices is raised.

The reason given was the spike in energy prices caused by Russia’s invasion of Ukraine.

In response, the Monetary Policy Committee last week raised the Bank Rate – the UK’s base interest rate – to 1.75%, its highest level since 2009.

This unprecedented shock to markets is being felt in different ways around the world, with the worst still to come for countries like the UK while others appear to have reigned in rampant prices.

INFLATION MAPPING: Record rates show global scale of crisis (Image: EXPRESS, GETTY)

Europe is the region hardest hit by restrictions on Russian imports of crude oil and natural gas, relying on the Nord Stream 1 gas pipeline to Germany for up to 40% of its gas supplies alone .

The drying up of this source since the start of the war in Ukraine has led to energy price inflation of 39.7% for the EU over the year, the driver of the 8.9% inflation rate of the block in July, according to Eurostat.

The Baltic countries, sharing a land border with Russia, have seen prices rise at a higher rate than any other EU country, with Estonia reporting 22%, Lithuania 20.5% and Latvia 19, 2%.

This is followed by many Eastern European countries such as the Czech Republic (16.6%), Poland (14.2%) and Hungary (12.6%).

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Inflation rate on the world map

Mapping inflation rates around the world (Picture: EXPRESS)

UK inflation set to rise further, BoE says

The Bank of England announced that inflation was expected to rise last week (Picture: PA)

The UK’s counterparts in Western Europe fared slightly better, although they also faced their highest inflation rates in decades.

Italy recorded inflation of 7.9% in July, Germany 7.5% and France 6.1%, according to their respective statistical agencies.

Inflation in Germany has been falling since peaking at 7.9% in May, a development attributed to Chancellor Olaf Scholz lowering fuel taxes to their lowest level allowed by the EU since early June.

Although it has not peaked, inflation in France has remained low compared to its neighbors, a fact that experts have attributed to the country which sources 70% of its energy from national nuclear power plants.

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Federal Reserve Chairman Jerome Powell

Federal Reserve Chairman Jerome Powell announces latest U.S. interest rate hike on July 27 (Image: GETTY)

There are also reasons for optimism from the United States, as the Federal Reserve revealed this week that inflation rose less than expected in July, to the tune of 8.5%.

This figure represents a significant drop from the four-decade high of 9.1% recorded in June.

Falling gasoline prices received credit, along with an unexpected drop in airfares.

The US central bank has also raised interest rates in recent months in an effort to fight inflation, hitting 2.25% in July.

Most Asian countries have been spared the global crisis of runaway inflation, a fact that experts have pinned on the continent’s more decisive and effective handling of the coronavirus pandemic.

But consumer inflation in China hit a two-year high of 2.7% in July, as pork prices jumped 20.2% according to the country’s National Bureau of Statistics.

Even Japan, renowned for its ultra-low inflation rates – more often faced with the opposite problem of deflation lately – raised its consumer inflation forecast to 2.3% for the year.

Australian inflation hit a 21-year high of 6.1% for the June quarter, while New Zealand hit a 32-year high of 7.3%.

UK inflation rate will decline in 2023

UK inflation to start falling in 2023 as economy contracts (Picture: EXPRESS)

As fuel prices fall and central banks around the world raise interest rates, financial markets have started to price in lower inflation rates over the next few years.

However, while inflation remains elevated in the near term, consumer budgets remain tight and rapid increases in the cost of borrowing have sparked a wave of recession fears.

Although the European Commission’s summer 2022 economic forecast calls for 1.5% growth in 2023, economists have said a bloc-wide recession is inevitable if Russian gas supplies are completely cut off. interrupted.

Along with its interest rate hike announcement, the BoE said this expects the UK to enter recession from the last quarter of the year, with the economy contracting throughout 2023.

Since U.S. figures released last month showed negative growth for the first two quarters of the year, the Biden administration and the National Bureau of Economic Research have scrambled to push back against claims that the world’s largest economy is already in recession.

The last time the IMF declared a global recession – where annual global economic output falls – was during the height of the Great Recession in 2009, a scenario potentially predicted for a return in 2023.

Mary I. Bruner