Serious global inflation difficult to resolve in the short term
- Supply chain disruptions, rising energy prices, and rising interest rates cause inflation.
- Inflation trends may become more uncertain and more volatile.
Senior Reporter Jerry Ahn
The world economy is experiencing severe inflation. As of December last year, the US consumer price inflation rate was 7% and the EU consumer price inflation rate was 5.1%, a record for the first time in 40 years. Korea's consumer price increase rate of 4.1% in March 2024 was recorded for the first time in 14 years and 4 months since November 2008.
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Inflation in the United States was 3.4% in April this year, due to a shortage of commodity supplies and rising global commodity prices, especially energy prices. To curb inflation, the U.S. Federal Reserve System (Fed) is raising interest rates.
Inflation in Europe was affected by supply chain disruptions and rising energy prices. In April this year, the euro zone's annual inflation rate hit 2.4%. The European Central Bank (ECB) is adjusting monetary policy to control inflation.
Inflation in Asia was mainly affected by rising global commodity prices, exchange rate fluctuations, disruptions in global supply chains, and natural disasters.
It is a well-established belief that rising prices reduce household consumption, reduce corporate investment, and slow economic growth.
A common major cause of global inflation right now is the supply chain disruption caused by the COVID-19 pandemic. This increased production costs and led to rising prices. In addition, the war between Russia and Ukraine, which began in 2022, caused a surge in energy prices and became a factor in further deepening global inflation.
The fact that central banks in major countries, including the U.S. Federal Reserve, have raised interest rates one after another in order to suppress impending inflation is also considered a cause of inflation.
Most experts expect global supply chain disruptions and rising energy prices to continue. They predict that it will be difficult to solve the inflation problem in the short term.
The International Monetary Fund (IMF) predicted the global inflation rate to be 6.6% this year and 4.3% next year. The Korea Development Institute (KDI) estimates Korea's inflation rate to be 2.5% this year.
Some experts are also raising the possibility that inflation will continue for a long time. U.S. Federal Reserve Chairman Jerome Powell mentioned the possibility that it may take a considerable amount of time to suppress inflation, and European Central Bank (ECB) President Christine Lagarde announced that strong measures would be taken to suppress inflation.
Experts also point out that inflation trends are likely to become more uncertain and more volatile. The Institute of International Finance (IIF) explained that geopolitical tensions, supply chain disruptions, and energy price volatility could pose risks to the inflation outlook.
Cooperation between governments, businesses, and the international community is needed to curb global inflation and promote economic growth. Governments must implement policies to improve supply chains, and energy conservation policies, promote economic growth through fiscal policies, and stabilize financial markets. Each company must also improve productivity, make efforts to reduce costs, expand investment in energy conservation, and diversify its supply chain. The international community must make efforts to strengthen international financial and trade cooperation and stabilize the supply of energy resources.
The current global inflation is not just an economic problem, but also a complex problem that affects the entire society of each country. In particular, recently, large-scale natural disasters caused by climate change have occurred all over the world, making it more difficult to predict future difficulties. We need to look at the real crisis seriously and check global inflation trends more carefully.
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