Category: monetary policy

The Inflation Factor: How Rising Food and Energy Prices Impact the Economy


This post is by Dorothy Neufeld from Visual Capitalist


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The Inflation Factor: How Rising Food and Energy Prices Impact the Economy

How Rising Food and Energy Prices Impact the Economy

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Since Russia’s invasion of Ukraine, the effects of energy supply disruptions are cascading across everything from food prices to electricity to consumer sentiment.

In response to soaring prices, many OECD countries are tapping into their strategic petroleum reserves. In fact, since March, the U.S. has sold a record one million barrels of oil per day from these reserves. This, among other factors, has led gasoline prices to fall more recently—yet deficits could follow into 2023, causing prices to increase.

With data from the World Bank, the above infographic charts energy shocks over the last half century and what this means for the global economy looking ahead.

Energy Price Shocks Since 1979

How does today’s energy price shock compare to previous spikes in real terms?

U.S.$/bbl EquivalentCrude OilNatural GasCoal
2022*$93$170$61
2008$127$100$46
1979$119$72$33

*2022 forecast

As the above table shows, the annual price of crude oil is forecasted to average $93 per barrel equivalent in 2022⁠. By comparison, during the 2008 and 1979 price shocks, crude oil averaged $127 and $119 per barrel, respectively.

What distinguishes the 2022 energy spike is that prices have soared across all fuels. Where price shocks were (Read more...)

Visualized: The State of Central Bank Digital Currencies


This post is by Marcus Lu from Visual Capitalist


central bank digital currencies

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Visualized: The State of Central Bank Digital Currencies

Central banks around the world are getting involved in digital currencies, but some are further ahead than others.

In this map, we used data from the Atlantic Council’s Currency Tracker to visualize the state of each central banks’ digital currency effort.

Digital Currency – The Basics

Digital currencies have been around since the 1980s, but didn’t become widely popular until the launch of Bitcoin in 2009. Today, there are thousands of digital currencies in existence, also referred to as “cryptocurrencies”.

A defining feature of cryptocurrencies is that they are based on a blockchain ledger. Blockchains can be either decentralized or centralized, but the most known cryptocurrencies today (Bitcoin, Ethereum, etc.) tend to be decentralized in nature. This makes transfers and payments very difficult to trace because there is no single entity with full control.

Government-issued digital currencies, on the other hand, will be controlled by a central bank and are likely to be easily trackable. They would have the same value as the local cash currency, but (Read more...)

Interest Rate Hikes vs. Inflation Rate, by Country


This post is by Jenna Ross from Visual Capitalist


graphic comparing interest rate hikes with inflation in various countries

Interest Rate Hikes vs. Inflation Rate, by Country

Imagine today’s high inflation like a car speeding down a hill. In order to slow it down, you need to hit the brakes. In this case, the “brakes” are interest rate hikes intended to slow spending. However, some central banks are hitting the brakes faster than others.

This graphic uses data from central banks and government websites to show how policy interest rates and inflation rates have changed since the start of the year. It was inspired by a chart created by Macrobond.

How Do Interest Rate Hikes Combat Inflation?

To understand how interest rates influence inflation, we need to understand how inflation works. Inflation is the result of too much money chasing too few goods. Over the last several months, this has occurred amid a surge in demand and supply chain disruptions worsened by Russia’s invasion of Ukraine.

In an effort to combat inflation, central banks will raise their policy rate. This is the rate they charge commercial banks for loans or pay commercial banks for deposits. Commercial banks pass on a portion of these higher rates to their customers, which reduces the purchasing power of businesses and consumers. For example, it becomes more expensive to borrow money for a house or car.

Ultimately, interest rate hikes act to slow spending and encourage saving. This motivates companies to increase prices at a slower rate, or lower prices, to stimulate demand.

Rising Interest Rates and Inflation

With inflation rates hitting (Read more...)