The most telling signs of inflation are not in the newspaper’s business section but your grocery bag.
One day, you go to the supermarket and find that your usual carton of milk is now priced at US$3 more than before. A cruel joke. As you browse the other aisles, you find that all everyday goods, be it meat or washing liquid, are now more pricey. And just like that, your grocery bill is reaching amounts you can’t afford. What’s worse? Your salary can’t keep up, and you have to start cutting corners. That’s the crushing reality for many people living in countries experiencing inflation.
This year, many countries witnessed record-breaking inflation due to the pandemic and Russia’s invasion of Ukraine. Rising interest rates shook stock markets, but most importantly, they have made everyday needs more expensive for the average citizen. Here’s a look at how different countries are reeling under the impact of growing inflation.
The United Kingdom
In June 2022, inflation in the United Kingdom hit a 40-year-high of 9.4%. Concerned about the rising costs of basic human needs, like fuel and food, the Bank of England, the U.K.’s central bank, decided to raise interest rates by 50 basis points—the biggest increase since 1995—in anticipation of more significant inflation.
The bank’s Governor Andrew Bailey noted in an interview, “We’re facing a very big shock to inflation.” He claims that the unexpected invasion of Ukraine and subsequent increase in energy prices are to blame for this inflation. Further, he shared during a press conference that the country’s GDP growth has slowed, and the U.K. economy is likely to enter a recession later this year.
The United States
“There’s a clock running here, where we have inflation running now for more than a year,” the Chair of the Federal Reserve of the United States, Jerome H. Powell, noted in June 2022.
Inflation in America, like in the U.K., hit a four-decade high of 9.1%. From beer to tampons—rising prices on seemingly commonplace items are shrinking people’s grocery lists and making them reevaluate their finances.
In India, besides rising prices and interest rates, employees in the service industry are also facing the wrath of inflation. Since things have become costlier, there is a decrease in demand for services.
That said, some staff members of the Reserve Bank of India (RBI), India’s central bank, feel that the worst of the inflation might be over for the country. Recovery is expected later than sooner, somewhere in the second half of 2023, but the rupee’s dwindling performance leaves plenty to be ascertained.
Can inflation be good?
The word “inflation” has very negative connotations. Often, it elicits strong rebukes and exasperated sighs. However, inflation doesn’t always have to be bad. In fact, a little inflation can bolster economic growth, as it encourages spending. It helps businesses gain profit and thus provide more products to consumers. This, in turn, increases demand, which increases production and boosts employment. So, it can actually be a win-win!
However, once inflation hits larger digits, it becomes troublesome. That’s because, at a certain point, money starts to lose its value. So, even though you might have a lot of money, you can’t buy as much as you could before. This is called “hyperinflation”, and it’s what happens when inflation spirals out of control.
While inflation can help an economy grow, too much of it can cause severe damage. That’s why countries tread cautiously when dealing with inflation and take strict monetary measures to contain it. However, nobody has any control over unpredictable events, like the pandemic, and how they impact the economy. In such a case, the only recourse is to hope for the best and brace for the worst.
Ultimately, inflation is more than numbers in a news article or colorless conversations. It is the average person’s everyday reality. Whether it yields a positive or negative outcome depends on the country’s leadership, financial policies and proactiveness. On an individual level, it depends on how well the citizens can weather the storm.
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