The world’s leading central banks are expected to start tightening monetary policy in the coming months as inflation in many countries hits multi-year highs and households’ cost of living rises. House prices have also risen.
Some economists fear a general return to the chronic inflation of the 1970s. Over the past year, East Asia has been largely an exception to the global pattern — but even here, prices have started to accelerate.
This page provides a regularly updated visual representation of consumer price inflation around the world, including economists’ expectations for the future. It breaks down inflation into its main components, showing what higher food prices mean for consumers and where investors think inflation is headed over the medium term. It also tracks house prices.
One of the points of contention among politicians and economists is whether the rise in consumer prices is temporary and will soon subside, or whether it may prove more permanent.
But even those who believe that inflation will fall next year agree that the inflationary shock will last longer than originally thought. Economists surveyed by Consensus Economics, a company that compiles the forecasts of leading forecasters, have steadily revised upwards their expected inflation figures for 2022.
Another area of concern is the prices of assets, especially houses. These have soared in many countries during the pandemic, spurred by ultra-loose monetary policies, homeworkers’ desire for more space, and government income-support programs.
Rising consumer price inflation is a challenge for central banks, not least for the G7 countries, which have a price stability target of 2 percent. To achieve this goal, central banks can adjust monetary policy to contain demand. But such tools are less effective in combating inflation caused by supply shortages. As Bank of England Governor Andrew Bailey has said, monetary policy is “not getting more gas, more computer chips, more truck drivers”.
The rise in energy prices, which has led to inflation in many countries, is a case in point. In a sign that inflation may be spreading beyond energy, the prices of many other items are also rising – particularly in countries where consumer demand is strong enough for businesses to pass on higher costs.
Rising prices limit what households can spend on goods and services. For the less affluent, this could leave them unable to afford basic needs such as food and shelter.
Daily data on staples such as the wholesale price of breakfast items provides an up-to-date indicator of the pressures consumers are facing. In developing countries, the wholesale cost of these ingredients has a greater impact on retail food prices; Groceries also make up a larger proportion of household expenses.
Debate continues as to whether the surge in inflation is temporary or more permanent. Team Transitory advocates believe the price spikes are due to a one-time spike in consumer demand met by a one-time surge in supply chain disruptions. Proponents of Team Permanent point to a broader pattern of price increases, particularly in countries where labor shortages are driving wages higher.
Markets generally appear to have sided with ‘Team Permanent’ and have steadily priced in rising inflation over the next five years in many countries.
