Recently, the UK reported a huge increase in inflation, according to the office of national statistics. The Consumer Price Index (CPI) increased to 9% in April 2022 as against 5.5% in January 2022. The increase of 9% in CPI is the highest since 1989, surpassing the 8.4% annual increase recorded in March 1992.
The UK energy regulator raised the household energy price cap by 54% in April 2022 after an increase in global energy prices. Food prices increased nearly 7% in April 2022 compared to that in April 2021. The prices of housing, water, electricity, gas, and other fuels also registered an increase of more than 19% YoY.
Increasing Inflation in Other Major Economies
Inflation is increasing around the world. In April 2022, inflation in the US increased to 8.3%, while inflation in Germany reached 7.4%, and 8.3% in Spain. Inflation in France also reached a peak at 4.8% in April 2022. The UK recorded the highest inflation among the major economies.
Why is Inflation Increasing around the World?
The high prices of fuel and food are aggravating inflation globally. Food prices have been rising due to supply-chain disruption caused by the Covid-19, followed by a poor harvest in the United States, Canada, and other countries. Meanwhile, India imposed a ban on wheat export, and Indonesia also halted the export of palm oil to control the shortages and bring down domestic prices. The conflict between Russia and Ukraine further exacerbated the food supply crisis. The prices of fuel also increased dramatically as Russia supplies 19% of the world's natural gas and 11% of the oil.
Measures to Tackle Inflation
To control the increasing inflation, Central Banks around the world decided to pursue aggressive monetary policies. The US Federal Reserve recently raised interest rates by 0.5%, and the Bank of England also raised interest rates by 1%, with other central banks also following suit to keep inflation in check. The increase in interest rates is likely to continue in 2022 if inflation rises further. However, continuous increase in interest rates combined with high inflation could hamper the overall economic growth and a global slowdown.
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