Global Inflation Update: The Good, the Bad and the Ugly

Key takeaways

• Inflation has affected every major economy in the world after the Covid pandemic
• The U.S. is doing the best, whereas the E.U., Japan and China are having more minor successes
• U.K. inflation is ridiculously high with no end in sight

After the pandemic, inflation hasn’t just been a U.S. problem: it’s taken hold of all of the major economies in different ways. Some are doing well at battling back, whereas others look like they’re just running around in circles. Let’s take a look at how some of the world’s biggest economies are handling inflation concerns.

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The good: The U.S.

We say ‘good’ with a pinch of salt here, but some economies are doing better than others in the battle against inflation. One of them is the U.S., which saw headline inflation fall to under 5% for the first time in two years last month after the Fed’s aggressive monetary tightening policy.

It’s still not great news, though, as the banking crisis, a too-hot jobs market and chronic undersupply of homes pushing house prices higher means inflation isn’t falling as quickly as the Fed would like.

The bad: The EU, Japan and China

The European Central Bank recently moved its benchmark rate to 3.25%, a high note seen since 2008. The move came after inflation accelerated slightly for the E.U. in April, hitting 7% for the headline, while core inflation retreated to 5.6%. The German economy is officially in a recession, with the country’s headline inflation at 7.2%.

Meanwhile, in Japan, headline inflation reached a four-decade high of 4.1% in February, cooling and accelerating again by April’s arrival. Many expect the Bank of Japan to raise its price forecasts for the year as a result. On the plus side, Japan’s stock market is doing incredibly well and is trading at highs not seen since the 1990s. Silver linings, we guess?

China’s recovery after its worst performance in 50 years last year due to strict Covid policies has been so-so. In March it had the slowest CPI pace since September 2021, coming in at 0.7% instead of the forecasted 1%, while PPI fell at the fastest rate since June 2020. The Chinese government has said it will work on increasing exports and helping the manufacturing sector recover.

The ugly: The U.K.

The U.K. saw headline inflation fall from 10.1% to 8.7%, missing estimates of 8.2% from analysts. Don’t be fooled by the sharp drop in headline CPI for the U.K. economy: things are still very bad and it missed its target by some way. Food inflation is over 19%, core CPI accelerated to its highest level in 31 years and now the markets are predicting a 5.5% interest rate peak from the Bank of England. Yikes.

The bottom line

We won’t lie: things don’t look great right now worldwide. Some countries are handling it better than others, but each country’s nuances and economic policies play a part in bringing down inflation after an unprecedented pandemic. As a result, investors are in for a rough ride in the coming months.

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