Central Banks Unable to Cope With Rising Inflation

With inflation at multi-decade highs central banks in many countries started to hike policy rates in 2021. Through more than a year of monetary policy tightening CPI rates continue to rise all over the world.

• Data on inflation rates shows that distance between CPI year-over-year growth and central banks' inflation policy targets increased in all economies (in a sample of 38 countries whose monetary policy rates are tracked by Bank for International Settlements) since mid-2021.
• In 37 countries (including United States) consumer price inflation has increased above the monetary policy inflation targets. China is the only exception where CPI rate is below monetary policy target.
• Today only four central banks (China, Japan, Indonesia and Croatia) keep their policy rates unchanged or below compared to end of 2020 level.

Note: Monetary policy rate is the rate that is used by central bank to implement or signal its monetary policy stance. It is most commonly set by the central banks policymaking committees (IMF). Monetary policy targets of CPI inflation shown below include upper limit of deviation from target where applicable.