scorecardresearchJune inflation numbers across the world is setting records
Most countries are currently experiencing multi-year or decades-long periods of excessive inflation.

June inflation numbers across the world is setting records

Updated: 06 Jul 2022, 10:47 AM IST
TL;DR.
Inflation has surged throughout the world as a result of high food and fuel prices caused by the Russian-Ukraine war. Food costs have increased due to a shortage of fertiliser, while crude oil prices have risen due to war-related concerns.

Inflation - is the rate of change in prices over a given period of time. What if this rate continues to rise Quarter after Quarter? If this happens consumers are forced to spend more money on everyday items, such as petrol, vegetables, cooking oil, LPG, and FMCG products. In fact, since the beginning of the year, inflation has been rising faster breaking a decade's high numbers. Naturally, central banks use interest rates to limit inflation, and all major economies have hiked interest rates at least once so far in 2022. Major central banks have turned to monetary tightening from expansionary policies which began during the start of the pandemic. 

Inflation has surged throughout the world as a result of high food and fuel prices caused by the Russian-Ukraine war. Food costs have increased due to a shortage of fertiliser, while crude oil prices have risen due to war-related concerns.

When Russia invaded Ukraine in February, the initial panic was felt primarily in crude oil and financial markets. However, as the battle progressed, the world saw the real impact on the back of war clouds. It caused an increase in food prices, a shortage of edible oil, a coal crisis, a rise in metal prices, and a gas scarcity. This high inflation came at a time when the global economy was recovering from Covid.

The United Nations’ Food and Agriculture Organization Food Price Index already shows international rice prices creeping up for the fifth straight month to reach a 12-month high, according to the latest May data published last week.

Back in India, the Reserve Bank of India has revised India's inflation projection to 6.7 per cent from the earlier estimate of 5.7 per cent. The average estimates of crude oil price (Indian Basket) of US $105 per barrel and a normal monsoon in 2022 lead to inflation estimates of 6.7% in 2022-23, with Q1 at 7.5%; Q2 at 7.4%; Q3 at 6.2% and Q4 at 5.8%.

Most countries are currently experiencing multi-year or decades-long periods of excessive inflation.

According to data from Trading Economics, India ranks at 110 among a total of 180 countries with a 7.04 per cent (May 2022) inflation rate.

Lebanon has the highest annual inflation rate in the world with 211% in May 2022. Consumers in the small western Asian country are paying almost three times more for goods and services than they were paying in the last year. 

The next country on the list was a country located near the southeastern coast of Africa, Zimbabwe. The annual inflation rate jumped to 192% in June. Commodity prices have skyrocketed due to a depreciation in the Zimbabwe dollar. The currency has lost more than two-thirds of its value against the dollar this year. Zimbabwe's central bank raised interest rates to 200% from 80%, Bloomberg reported.

In 2008, inflation in Zimbabwe was at 79 billion% per month, with the YoY inflation rate reaching an astounding 89.7 six trillion per cent. This resulted in the US $1 becoming equivalent to Z$2,621,984,228.

Next comes Sudan, which has an annual inflation rate of the same as Zimbabwe at 192%. Sudan faced a severe shortage of foreign currency, which further spiralled the depreciation of the Sudanese pound, leading to imported inflation.

Venezuela, an oil-rich country, has the world's fourth-highest inflation rate. This country has an annual inflation rate of 167%. The country’s dependence on petroleum income left the country particularly vulnerable to fluctuations in oil prices during the 1980s and 1990s. 

Syria has the fifth-highest inflation rate in the world, with a rate of 139 per cent in January 2022. Since the outbreak of the Syrian civil war, the Syrian economy has been hit by massive economic sanctions restricting trade with the Arab League and also with major economies. 

In 2018, the World Bank estimated that about one-third of Syria's housing stock and one-half of its health and education facilities have been destroyed by the conflict, and a cumulative total of $226 billion in GDP was lost due to the conflict from 2011 to 2016.

The Syrian economy suffered from conflict-related hyperinflation. The national currency, the Syrian pound, tumbled in mid-2020 against the US dollar. The pound, which traded at £S 47 to the dollar before the 2011 uprising, plunged to over £S 2,512.53 to the dollar in 2022, as per media reports.

Meanwhile, China and Japan are among the top economies with the lowest inflation rates at 2.5 per cent and 2.1 per cent, according to data from Trading Economics. 

The following is a list of the countries with the highest yearly inflation rates.

Turkey: The annual inflation rate in Turkey accelerated for the 13th consecutive month to 78.6 per cent in June of 2022, the highest since September of 1998, (a 24-year high).

Inflation has surged due to a fall in Turkey's currency lira. The lira lost more than 40% of its value in 2021 as Turkey's central bank slashed its policy rate by 500 basis points to 14 per cent from 19 per cent from September to December despite high inflation. The bank has kept the same rate since then.

After the dramatic plummet in 2021, the lira continues its downward trend and has lost over 20 per cent of its value against the US dollar over the past six months. Last week, the president announced that the government had decided to raise the minimum wage in the country by 30%.

Srilanka: Sri Lanka’s annual inflation jumped to an all-time high of 54.6 per cent in June of 2022 from 29.8 per cent in the previous month. It was the highest inflation rate ever recorded and the seventh consecutive double-digit growth in consumer prices amid a persistent shortage of food and fuel due to the country’s depleted foreign exchange reserves, according to Trading Economics.  

Further, the country restricted fuel supplies and urged residents to stay home until July 10th as the country could not source fuel, even for cash, as suppliers insist on clearance of past dues.

Country NameAnnual Inflation (%)Previous high
Turkey78.6%1998
Srilanka54.6%All time high
Pakistan21.30%2008
Russia17.10%2002
Spain10.201985
United Kingdom9.10%1981
United States8.60%1981
Italy8%1986
Germany7.60%1990
New Zealand6.90%1990
South Korea6%1998
France5.80%1985
Australia5.10%2000
Switzerland3.40%1993
Source: Trading Economics  

South Korea: Consumer prices in South Korea rose 6% year-on-year in June 2022, accelerating at the fastest pace since November 1998, as higher prices of industrial goods, services, agricultural products, and utility bills kept adding to inflationary pressure amid increasing raw-material prices. The country’s inflation rate also held above the central bank’s 2% target for the 15th consecutive month.

United States: The Annual inflation rate in the world's largest economy unexpectedly accelerated to 8.6% in May of 2022, the highest since December of 1981 and compared to market forecasts of 8.3%. Food costs surged 10.1%, the first increase of 10% or more since March 1981.

India: The annual inflation rate in India edged down to 7.04 percent in May of 2022 from an 8-year high of 7.79 percent in the previous month. However, it remained above the RBI's target range of 2%-6% for the 5th straight month.

United Kingdom: Rising food prices pushed the United Kingdom’s consumer price inflation to a 40-year high of 9.1 percent last month. The country's currency Sterling has beacmae one of the worst-performing currencies against the US dollar this year.

Germany: Annual inflation rate in Germany slowed more than expected to 7.6% in June of 2022 from 7.9% in May which was the highest reading since German reunification.

When the inflation is higher than the nominal rate, the real rate of interest is negative,. 
When the inflation is higher than the nominal rate, the real rate of interest is negative,.