Inflation Amid Two Crises in G7 Countries

In 2022, advanced economies grappled with the most pronounced inflationary pressures in nearly four decades, harking back to 1982. The annual inflation rate soared to 7.3%, reaching its zenith at 8.0% in October of the same year. Following a nine-year span of subdued inflation, registering below 2% from 2012 to 2020, advanced economies experienced a surge in inflation in 2022. Starting at 0.4% in November 2020, the annual inflation rate gradually ascended, hitting 6.1% by February 2022. Subsequently, following Russia's invasion of Ukraine, inflation continued its upward trajectory, peaking at around 8% from June to October 2022. From November 2022 onwards, inflation gradually subsided, reaching 3.2% in December 2023.

Various factors, both on the supply and demand sides, contributed to heightened inflation, encompassing supply chain disruptions, escalating commodity and import prices, augmented production costs, post-pandemic consumption growth, speculative activities, and expansionary monetary policies.

The pinnacle of inflation was observed across G7 countries between June 2022 and February 2023. Notably, the United States experienced a peak of 9.1%, while Canada recorded 8.1% in June 2022. Subsequently, in October 2022, Italy witnessed an inflation peak of 11.8%, the United Kingdom 9.6%, and Germany 8.8%. Finally, Japan encountered a peak of 4.4% in January 2023, and France reached 6.3% in February 2023.

By December 2023, inflation rates had moderated in G7 nations. The United States and Canada registered rates of 3.4%, Germany and France 3.7%, and the United Kingdom 4.2%. Meanwhile, Japan and Italy reported inflation rates of 2.6% and 0.6%, respectively.