If we had to choose the economic phenomenon of the year, this would undoubtedly be that of the inflation; In 2022 we were in a situation that apparently had already been overcome many years ago.
The inflation observed in this year had not been registered for 4 decades in many of the nations of the worldwas a phenomenon that disrupted the entire economic context, already affected by the pandemic, by the Russia-Ukraine war and by other factors that have devastated the global economy in these “roaring twenties”.
generational inflation
Before going into the figures a bit, we must point out something that is compelling and that illustrates what happened in this year that is about to end.
The inflation levels observed this year were unknown to at least one generation, that of the Millennials; in fact there are two generations considering that some members of generation Z have already entered the labor market.
Although we have not reached the levels observed by generations X and Baby Boomers, we are still very far away, luckily, but without a doubt this phenomenon impacted everything in the world, becoming the most relevant thing of the year. It was due to the increase in inflation that the central banks modified their monetary strategy, in order to put a ceiling first, which they have apparently achieved, to later modify future expectations with lower inflation, although it will take time to happen. Of course, all based on interest rate hikes, also to levels not seen in decades.
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So now the only thing that makes the difference between other generations and the current ones is only one word: hyperinflation.
Fortunately, this year’s phenomenon, which in fact began in 2021, has not arrived and we hope that it will not become hyperinflation, if it happens the world will have many more problems than it currently does.
inflation multiplied
The fact that we have not reached hyperinflation levels does not mean that the phenomenon of high inflation is not serious and is not considered relevant in the economic context of recent decades.
Analysis of the figures shows us what happened. Let’s give an example to realize the dimension of the problem.
According to figures from International Monetary Fund (IMF), the average inflation rate in the decade from 2010 to 2020 registered in the European Union was 1.20 percent; In contrast, at the end of last November, the inflation average for the year was 8.30 percent in that region.
It is true that the figure is not even remotely similar to what could be observed in a hyperinflationary process, but without a doubt we can assure that this year inflation multiplied in the European Union, it grew several times compared to its level observed a decade ago before.
Let’s go with an example closer to us, with the United States; In this country, IMF data indicates that the average inflation for the past decade was 1.75 percent, while only in 2022 this indicator was at 8.17 percent at the end of the penultimate month of the year.
We are facing an inflationary spike not seen in decadeswith levels that could portend a disaster if not controlled, that was the fundamental mission and objective of the central banks as soon as they realized the magnitude of the problem, unfortunately it happened when the phenomenon was already taking on other dimensions, hence it will take time. decrease, that is, it will take time to see an inflation rate similar to the average of the previous decade.
Central banks, from pride to action
In a certain way, the most important central banks in the world were somewhat arrogant, they dismissed the signs of an inflationary rebound observed in 2021, they argued over and over again that it was a transitory phenomenon, and finally, as we say in Mexico: “in sin they carried the penance”.
The bad thing is that not only are the central banks paying dearly for their mistake and arrogance in underestimating the initial increase in inflation, but the economy as a whole has been affected.
The actions undertaken have shown that they are the correct ones, at least at the end of this year inflation reached its peak around the month of October, and seems to have headed towards less elevated indicators. But, also as the classic would say: “the damage is done”.
This 2022 was characterized by registering levels of inflation not seen in decades, let’s hope this does not become a habit.
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