Central Banks Remain Calm While Facing Inflation

The inflation data for the US came in, and October’s result is 6.2%, causing investors to scratch their heads. Many are misinterpreting the information as an increase in prices of 6.2% in comparison to the previous month. Such an increase would truly be devastating, which is why many investors are panicking about the economic state. However, you can breathe a bit easier, as the data refers to the difference from last year’s October. That being said, the number is quite high, and it’s not an overreaction to feel uneasy because of it.

Namely, the US inflation rate is noticeably above Europe’s, which sits at 4.1%. And even Europe is significantly behind China, which is at a comfortable 1.5%. However, it’s important to note that the different economic powers named here have different economic structures. As such, the difference that looks vast on paper is not as noticeable in reality. One thing is universally true, however – the world needs to deal with a lasting increase in prices brought by COVID.

And while central banks are faced with such issues, many people call for immediate action. There seems to be asking for tighter economic policies and suppressing demand. However, while that may alleviate some problems, it may only make others harsher. For example, it’d do nothing for the lack of energy supplies all across the world. 

But we can’t just remain entirely calm either. The growth of inflation means the decrease of real pay for workers. Namely, analysts from the Bank of America claim that’s already a reality for most employees. And with the markets putting in their all-time best performances, there are fewer and fewer excuses for declining living conditions. While there may not be an immediate, simple solution, increasing inflation rates and decreasing living standards are the prime economic issues developed countries face.