Country-Wise Inflation Rates: Annual inflation rates all over the world are prevailing at unusually high levels (up to as high as 85 per cent) and to control it, central banks globally, including RBI, are raising interest rates aggressively. The US Federal Reserve on Wednesday raised the benchmark borrowing rate by 0.75 percentage point, the fourth straight increase of that size and the sixth hike this year. The Bank of England has also hiked the interest rate from 2.25 per cent to 3 per cent, the highest-ever rise in interest rate in 33 years.
Turkey has the highest inflation rate in the world at 85.51 per cent, which is an about 24-year high. Despite the high inflation, the central bank there has been cutting its policy rate in an easing cycle long sought by President Tayyip Erdogan.
Turkey is followed by Argentina, where the inflation rate currently stands at 83 per cent; the Netherlands, where inflation is at 14.5 per cent; Russia (13.7 per cent); Italy (11.9 per cent); Germany (10.4 per cent); UK (10.1 per cent); US (8.2 per cent); and South Africa (7.5 per cent).
Currently, the inflation rate in India is currently at 7.4 per cent, followed by Australia with 7.3 per cent; Brazil (7.1 per cent); Canada (6.9 per cent); France (6.2 per cent); Indonesia (5.9 per cent); S Korea (5.6 per cent); Saudi Arabia (3.1 per cent); Japan (3 per cent); and China (2.8 per cent).
Though inflation in India has been beyond the Reserve Bank of India’s (RBI) target of 4 per cent (+- 2 per cent) for the past nine months in a row, the rate of price rise is less as compared with other major global economies, including US, UK, Russia, Germany, Turkey, South Africa and Italy.
Impact Of High Inflation Rates Across The World On India
High inflation rates across the world are forcing the central banks globally to opt for tight monetary policy. Rating agency Crisil in its latest report has said that as central banks aggressively raise rates to fight inflation, countries will find it hard to stave off a sharp downturn in activity.
“Policy tightening and weakening growth momentum in advanced economies have already started to impact India in the form of slowdown in exports and FPI outflows. Since monetary policy actions work with a lag, the effects of rate hikes in advanced economies are also going to become more pronounced next year,” Crisil said.
The RBI’s Monetary Policy Committee on Thursday (November 4) meet under Section 45ZN of the RBI Act, 1934 (which deals with failure to maintain the inflation target). The meeting was to discuss and draft a report for the government on why the central bank has failed to keep retail inflation below the target of 6 per cent for three consecutive quarters since January this year.
India’s retail inflation accelerated to a five-month high of 7.41 per cent in September. It was the ninth month that the Consumer Price Index (CPI)-based inflation has remained above the RBI’s upper tolerance limit of 6 per cent, and has risen despite the central bank’s efforts to curb it. The retail inflation had stood at 7.04 per cent in May, 7.01 per cent in June, 6.71 per cent in July, 7 per cent in August and now 7.41 per cent in September.
The RBI has raised 190 basis points since May this year. In May, the central conducted its off-cycle monetary policy review to hike the repo rate to control inflation. It had hiked 40 basis points in the review.
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