Why is inflation hitting majority of the countries worldwide seemingly at the same time?
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There are specific reasons for every country and region. But there is also a bit of a reminder and some underlying factors. None of this is truly ELI5, in a sense.
First, the reminder. If you’re under, say 35 years old, what has been “normal” inflation isn’t actually normal. Many of the major economies had low inflation for nearly 15 years and in Japan, that has been the case for nearly 30 years. The central bank target for the developed countries is around 2-2.5%. So many central banks have been running an inflationary/expansionary model for a decade and a half, increasing the money supply.
Second, COVID. Again, major economies ran VERY expansionary policies from 2020/2021. Lots of cheques sent to people and money used to prop up companies that experienced shut down difficulties.
Third, the energy market. Russia is a huge oil exporter. The EU rapidly transitioning away from “low cost” Russian oil/gas and this caused the energy market to go into a bit of turmoil. Economies that import oil suffer because the EU buys a lot more of non-Russian oil driving up energy prices for everyone. All of this makes energy less cheap for Europe too. Energy prices underly almost any manufactured product, not only transportation. Food production in modern times require a lot of fertiliser much of which is made from oil products.
Fourth, conflict. Wars drive up economic uncertainty and also hampers investment (broadly). Companies delay product and investments. New supply chains are costly and typically less efficient until scale and maturity develops. This makes things more expensive.
Fifth, China. Geopolitically, there is also uncertainty how the Chinese economy and politics develop. Being in a highly strained diplomatic situation means companies are moving some production away from China.
There are lots more factors – some more impactful and some less and it depends a lot on which country it is.
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