Inflation Forces Desperate Leaders to Try and Soften the Blow

The price of foods, fuels and other essential items are spiraling ever upward as Russia’s war on Ukraine compounds supply-chain woes stemming from the pandemic. Central banks may be in the driving seat when it comes to tackling inflation, but it’s governments that face the fallout and so are compelled to act.

While the nature of the problem is global, leaders know that the repercussions will be local. Already we’ve seen demonstrations in France driven by diminishing purchasing power. In the UK, where the governor of the Bank of England warned of “apocalyptic” food-price increases, what’s being called a cost-of-living crisis poses potentially the gravest threat yet to Prime Minister Boris Johnson’s government. In the US, President Joe Biden is pulling out the stops to try and halt the rise of the price of gasoline at the pump ahead of November’s midterm elections.

Below we set out some of the measures to combat inflation undertaken by governments in the world’s largest economies, and the political pressures they face.

AMERICAS

US

Inflation rate: 8.3% (April)

Maximal intervention, a lot at stake with midterms looming

Biden’s anti-inflation efforts have targeted gas, food, and auto prices through a series of executive actions. To drive down prices at the pump, Biden announced plans to release a million barrels of oil per day from strategic reserves over six months, and the suspension of a environmental rule blocking the summertime sale of higher-ethanol blend gas. The White House also said it would spend $1 billion in coronavirus funding to assist independent processors in the heavily consolidated meat and poultry sectors, and issued emergency regulations to speed the transit of grain, soy, and fertilizer along rail routes.

Separately, the administration expanded hours at the nations’ ports and imposed fines for carriers who leave containers idle on docks, in a bid to speed imports — which the administration hopes will improve the flow of goods including new cars and microchips used in American manufacturing. Biden has also suspended student loan payments and issued new regulations that effectively lower the cost of health insurance purchased through federal exchanges by poor and middle class families.