Inflation Data US: Inflation affects not only the citizens of Us but also the developing countries. Inflation in the US has reached a 41-year high. Know how it will affect developing countries.
US inflation has hit a 41-year high. This is the fastest one-year growth since June 1981. Prices of commodities ranging from gas to rent and food have gone up. The Bureau of Labor Statistics has released the inflation data in the country.
The Consumer Price Index (CPI) increased by 9.1 per cent compared to last year. Earlier, its growth in May was 8.6 per cent. On a month-on-month basis, its growth rate is 1.3 per cent. This may prompt the Federal Reserve to tighten monetary policy. Current inflation is 5 times higher than the Federal Reserve's inflation target of 2 per cent.
What is the cause of inflation?
In general, inflation increases when demand increases and supply decreases. But there are many reasons behind inflation in America.
- The first and foremost reason is the war between Russia and Ukraine. White House officials have blamed the war for inflation. Of course, before the war, inflation in the United States had increased in February.
- Another reason is the gap between demand and supply. Due to the quick discovery of a vaccine against the coronavirus, the US economy has improved rapidly. This has greatly increased the demand.
- The government helped the people who lost their jobs due to Corona. The demand from these people has also increased. However, supply has not increased compared to this demand. The main cause of current inflation is the gap between supply and demand.
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What will be the effect on developing countries?
Any event in the US economy also affects the world economy. Inflation in the US is more than 2 per cent relative to the developing countries. Therefore, the crisis they face may also affect developing countries in the future. There is currently a recession in the global market. Inflation in America has now added to it. Due to this, there is a possibility that the Federal Reserve will increase the interest rate in the future. Investors will start withdrawing money from the market after this rate hike. This will have a direct impact on the economy of developing nations. Investor withdrawals will further depreciate the currencies of developing countries.