According to Trading Economics, a website that provides users with information on 196 countries and regions and that forecasts utilizing more than 20 million economic indicators, exchange rates, stock market indexes, government bond yields and commodity prices, 87 percent of the world’s nations are experiencing inflation rates considered above the norm.
The U.S. Federal Reserve has not established a formal inflation target, however policymakers generally believe that an acceptable inflation rate is around 2 percent or slightly lower.
Countries experiencing acceptable or declining inflation rates
Of all the countries monitored only three have recently registered a negative inflation rate including Rwanda, Chad and the Maldives. The cost of goods for people living in Rwanda have actually been on a downward trend in recent months and the International Monetary Fund (IMF) is saying that Rwanda is well on its way to economic recovery following lockdowns implemented in an attempt to contain COVID-19 infections.
The fund projects that Rwanda’s Gross Domestic Product (GDP) is expected to come in at 10.2 percent in 2021 and it is forecasting a 7.2 percent bump in GDP for the country in 2022.
Countries that are experiencing acceptable levels of inflation include Japan (0.6 percent), Saudi Arabia (1.2 percent), China (1.5 percent) and Switzerland (1.5 percent).
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While China is registering a reasonable monthly inflation rate, the Producer Price Index (PPI) in the country — an index that measures the average changes in prices received by domestic producers for their output — jumped by 13.5 percent last October compared to the previous year. This increase was the fastest since the Chinese government began releasing such data in the mid-1990’s and could be indicative of an emerging trend. China’s overall inflation rate is expected to rise as these inflated PPI costs get passed down to the consumer.
Approximately seven percent of all 185 countries and regions measured are experiencing inflation rates between two and three percent including the United Arab Emirates (2.58 percent), Taiwan (2.62 percent), Portugal (2.7 percent) and France (2.8 percent).
France is an outlier in the eurozone. In December, inflation in the eurozone soared five percent, the highest level since the single European currency was created. A notable increase in energy prices in the region is the primary driver. Energy prices surged by a staggering 25.9 percent year-on-year. Food, alcohol and tobacco is up 3.2 percent.
Approximately 23.7 percent of countries are experiencing an inflation rate between three and five percent.
At the lower end of this group is Australia that recorded an inflation rate of three percent in September 2021 and at the higher end is Canada that saw the cost of goods and services rise by 4.8 percent in December, 2021.
Canada is experiencing its highest inflation rate since 1991
Canada’s recently announced inflation rate is the highest the country has experienced in three decades. It was the highest since September 1991, according to Statistics Canada.
Andrew Grantham, Senior Economist with CIBC Capital Markets told U.S. News, “A few weeks ago we may have been tempted to call a peak in inflation at this point. However, a reacceleration in energy prices, transportation issues impacting food costs and a strengthening once again in monthly house price gains suggest that we could grind a little higher still, before seeing a deceleration starting around spring time.”
Derek Holt, Vice President of Capital Markets Economics for Scotia Bank believes the core inflation rate is getting to the upper end of the target range and it may spook Canada’s central bank. He told U.S. News, “The thing I’d emphasize would be the further increase in the average of the core measures … We have core inflation getting to the upper end of the bank’s (Bank of Canada) target range and I think that’s going to spook them.”
The Bank of Canada is expected to raise interest rates by 25 basis points in January, 2022 in an attempt to temper the rising costs.
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The high end
A staggering 40 percent of all nations are experiencing an inflation rate between five and 10 percent, including Germany and Norway (5.3 percent), the UK (5.4 percent), India (5.59 percent) and the United States (7 percent).
Soaring inflation in the U.S. is being blamed for an unexpected dip in retail sales in December, that could signal that persistently rising inflation is prompting a pullback in consumer spending.
Consumers in the U.S. are paying more for everything from groceries to cars as companies pass along costs that are a result of more expensive raw materials and supply chain delays.
In response, the U.S. Federal Reserve is expected to hike interest rates several times by the end of 2023.
Phil Orlando, chief equity strategist at Federated Hermes’, predicts that the Fed will raise interest rates six times in the next two years. “Our best guess is that we will see two quarter point rate hikes out of the Fed in the second half of next year [2022], and perhaps another four quarter point rate hikes over the course of calendar ’23,” Orlando told CNBC.
While economists originally characterized the current inflation in the U.S. as “transitory” recently they have begun to change their tune. Investors now forecast that the U.S. can expect inflation to continue to rise, albeit at lower levels, out to as far as 2024.
Runaway inflation
Approximately 16.7 percent of all countries measured are experiencing an inflation rate at or above 10 percent.
At the lower end of this spectrum are countries including Ukraine (10 percent), Brazil (10.06 percent), Pakistan (12.3 percent) and Mongolia (13.4 percent).
The country experiencing the most inflation is Venezuela that registered a staggering 686 percent increase in the cost of goods and services in December, 2021.
While that rate of inflation is massive the nation is considered to be exiting an era of hyper-inflation.
Inflation exceeded 1,000,000 percent in 2018 in the country going as high as 2,000,000 percent. In April 2019, the IMF estimated that inflation in Venezuela would reach an unheard of rate of 10,000,000 percent by the end of 2019.
Potential causes identified for the massive rates include heavy money-printing and deficit spending by the Venezuelan government under Nicolás Maduro’s presidency.
