Andrew Sentance, Senior Economic Adviser – Cambridge Econometrics & Former MPC Member
The 2020s is turning out to be a turbulent decade for the global economy. It started with a record post-WW2 decline in global economic activity due to the Covid pandemic. This was followed by a bounce back in the global economy last year. But that recovery is now running out of steam as the global economy faces multiple headwinds.
The biggest of these headwinds is inflation, which has risen to the highest levels seen for over 40 years across the western world. US and Eurozone inflation is 8.5 to 9 percent. In the UK inflation is over 10 percent. This is squeezing the purchasing power of consumers who are not seeing their incomes rising to keep up with inflation.
A major driver of this current inflation surge is sharp rises in energy prices. This energy price surge is being largely driven by the war in Ukraine following Russia’s invasion of its neighbour. The Ukraine war is also ...