Will inflation continue to rise in the world?
The American economist and Nobel Prize winner in economics Paul Krugman compares the current price hike to what happened in the aftermath of World War II
Inflation in the United States of America has reached its peak, exceeding 6% on an annual basis, a rate that has not been recorded over the past three decades. Will this situation continue for a long time or is it a temporary crisis?
In a report published by the Russian newspaper “Izvestia”, writer Dmitry Migonov says that the prices of goods and services have witnessed a record rise in the United States and most countries of the world, and have broken the records recorded during the past decade at least.
According to data from the US Bureau of Labor Statistics, inflation in October of this year reached 6.2% compared to the same month last year, and the United States has not recorded such a percentage since 1990, and prices rose sharply compared to September, increasing by 5.4 %.
According to the author, the increase in the prices of goods and services is mainly due to the rise in energy prices, which increased by 4.8% on a monthly basis, and the core inflation rate – which does not include the prices of volatile commodities such as food and fuel – exceeded the 4% threshold.
And real estate prices, in turn, recorded a noticeable increase, which indicates – according to the author – that the inflation rate will also rise in the real estate sector.
In 2020, the United States witnessed an increase in hourly wages at a rate that exceeded the rise in prices, but with the advent of the spring the situation turned upside down, and despite the entry of wages into the positive region in September of this year, the effects of the decline in real income became more severe than inflation itself, according to Writer.
Is the current inflation temporary?
For a long time, the Federal Reserve System in the United States has adopted a maximum rate of 2% for inflation, and during the past three decades, inflation has not exceeded this percentage except in limited periods, including the global financial crisis that struck the world in 2008, when the rate reached 4%.
In the euro area, where prices usually rise at a slow pace, the inflation rate reached 3.4% last September, and exceeded 4.1% in October, while in Russia, prices rose in October by 7.78% compared to the same period last year, in When inflation reached 20% in some countries, such as Turkey.
Officials in the US Federal Reserve system, other central banks, and many economists believe that the inflation that the world is currently witnessing is a temporary phenomenon linked to the Covid-19 crisis and the suspension of production and transportation chains.
What do the experts say?
The American economist and Nobel Prize winner in economics Paul Krugman compares the current price hike to what happened in the aftermath of World War II, specifically between 1946 and 1948.
On the other hand, others compare the current situation to the rise in inflation rates in 2011, and see that the main factor is the unprecedented increase in the debt burden on governments and the private sector.
But investor Adam Strauss believes that it is illogical to compare the current crisis with what happened in 2011, because of the large difference in the amount of financial stimulus.
Strauss believes that the decline in globalization, the decline in the value of the dollar, the energy crisis and the rapid rise in wages are all factors that indicate the continuation of the current state of inflation.
For his part, says Anton Tabakh, chief economist at the Russian credit rating agency, Expert RA, that no one can predict how long the inflation situation will continue.
Tabach believes that US Federal Reserve officials are in no hurry to take drastic measures to stem inflation, because they see the current situation as serving the interests of the US government.
As for Pyotr Pushkarev, an economic analyst at Tele Trade Group, he believes that inflation will be temporary, and he says in this context, “It seems that the 1970s scenario will not be repeated and we will not witness prolonged inflation, but the transitional phase and the accelerating rise in prices may last two years or more. 3 years, and accordingly prices may rise by 50%, and may reach 100% or more, after which the decrease in purchasing power will automatically stop inflation.”
For his part, financial expert Artem Arzamasev believes that the impact of the energy crisis and disruption of supply chains will be long-term, and therefore high inflation rates cannot be avoided.
Arzamasev stresses that raising interest rates from the Russian Central Bank is the most effective solution to combating price hikes.