The inflation rate, which was so moderate for so long, is now back in the news—and the news isn't good. The U.S. Consumer Price Index—the cost of a basket of items that are included in most monthly budgets—rose by 8.6% over the 12 months ending in May, while the so-called ‘personal consumption index’ (another measure of inflation) rose 6.3% over the same time period.
But is the U.S. alone in its inflationary trend? The answer is no, as many countries are seeing their monthly costs rising much faster than the 1-2% rate we’ve all grown accustomed to—and consumers in Turkey, Argentina, Russia, Brazil, Spain and the UK are having a harder time battling inflation than Americans. Furthermore, most countries calculate their inflation using measures closer to the personal consumption index. If you compare apples to apples, internationally, then the entire Euro area, Canada, Mexico, India, Italy and South Africa are suffering higher price increases than we are in the States.
The point here is that inflation has become a global phenomenon, even though most of the press coverage focuses on the U.S. Federal Reserve Board’s efforts to raise interest rates. If we’re going to defeat the rising costs of living, it will require the coordinated efforts of the global community, which means it is likely (though not guaranteed) that other central banks will follow the Fed’s lead and constrict liquidity and ultimately their economies.
This article was written by an independent writer for Brewster Financial Planning LLC and is not intended as individualized legal or investment advice.