.png)
The times have been challenging since the recovery of the pandemic, new challenges keep creeping in considering the various world affairs we have in play. The policies have been more in line to get in terms of regulating the economies has taken its course, but its repercussions are felt across the global markets. Considering the pandemic, the situation in most nations has taken a tumble in terms of the activities in the economy. The world has never seen such a scene in the last couple of decades this severe, and catastrophic, creating a domino effect of negative impacts across the globe.
The economies that we tend to look up to as potential trade partners mostly in the world would be the United Kingdom and the United States of America. Considering them as one of the prominent nations in terms of trading partners and potential players in world politics, any hit or misses in their economies do have a ripple effect at a global level. Understanding this on a deeper level is pretty much essential since its impact is having a far-reaching effect on all trading partners.
UK inflation
In recent times, the pandemic has turned the picture of a secure economy into a situation where the basic economic parameters, to a major tear-down. The United Kingdom has seen its highest inflation scenes way back in 1992 which is pegged at a rate of 6.2 percent- pretty high considering the timeframe. The nation had been fighting for its economic independence for quite some time in the latter half of the last decade- breaking from the European Union. The turmoil continued with its losing confidence in the proposals being put forward by the party headed by Theresa May. The fallout in the negotiations led to a major fallout and following the success of Boris Johnson saw success in the independence from the European Union. The success was short-lived with the Covid-19 pandemic and its variants attacking its masses. Though its situation was managed with the lockdowns and restrictions the nation had its economic parameters to a chaotic situation. With the highest rate of falling income in the UK the scenario of a sharp economic slowdown is on the lookout. In May, the nation saw a fall in their value in terms of their currency to an all-time two-year low that is close to the rate of 2 %.
Inflation has been an all-time highly discussed topic of 2022, which has seen a rising trend and has not stopped since. With the rise in inflation, the cost of necessities like food, and power has seen an increase in terms of production costs. With the war in Ukraine adding a lot of problems in terms of the energy crisis, the pain of the inflationary cost of energy is felt at the maximum. The nation has seen the highest level in terms of stagflation in this current decade, considering the low incomes and the high pricing of goods all thanks to the pandemic and the domestic economic conditions in the country. With the hope of passing a financial support bill in the parliament to tackle the economic crisis at the moment.
The other aspect is adding to the kind of trade agreements that are supposed to be signed, by the country. Though there has been a lot going on in terms of the concessions in the trade agreements, which are unilateral, there could be a potential threat from the European Union. This could be in terms of keeping the nation away from trade due to the terms of the agreement. At the moment, the nation is open to options in the aspect of trade as an international affair.
US inflation and Indian market repercussions
United states economy is said to be the benchmark in terms of a developed market in the world economy. Considering its magnitude of economic development in the domestic market it has a lot of impact on developing economies like ours as well. But the kind of reasoning for the rise in inflation in the States is mainly ‘demand-driven. The rise in demand in the US economy has been said to be increased manifold over time and considering its comparison to the other developed markets, it seemed to have outpaced others. What seemed to have happened in the United States is more in terms of the surge in the demand which was contributed by the cash transfers that happened early this year. This has keyed in the consumers of the markets of the United States to demand more. Considering this in a strictly economic sense it is caused by a simple ‘demand-pull inflation. Now if the Federal Reserve takes radical steps to control the situation rather than easing it would bring a lot of problems to the economy.
Now considering any of the major announcements in the economy, especially from the United States would have a massive impact on the world economy. Since our economy is said to be a global economy, a single change or a simple announcement of US key indicators could have huge ramifications in the markets as well. With the increased hiked rates to control the US economy, it sent shivers to the Indian market, plunging the exchange rate to an all-time high of 77.65 to a US dollar. The trading in the Indian stock markets tumbled drastically. It's all due to the announcement of the CPI inflation of 8.3 percent which is an all-time high for the United States whereas their target is said to be pegged at 2 percent. This all leads to a domino effect in the fall in crude pricing, commodity pricing, and so on. Considering all these small important facts, we can understand how the simple economic concept of inflation can change the world markets so drastically.
The concept of inflation needs to be closely observed and corrective measures and policies can be taken. A healthy rate of inflation would do wonders to economies across the globe. It's only a matter of time before the situation of the pandemic and the war crisis mellows down to keep the world economy at a progressive growth trend.
Comments