OPINIONISTA: Why freight costs and not oil are to blame for the spike in global inflation

When analysing the composition of the basket of goods and services that form the basis for the calculation of the consumer price indices in South Africa and most of its key trading partners, these prices certainly stand out, as do some food prices.

The lockdown restrictions induced by the pandemic not only blocked supply chains in ports around the globe, but is also did so in an errant manner. When one port reopened, some of its destination ports had been closed – this pattern kept repeating itself for the better part of two years. The cost of shipping bulk commodities spiked even more. Research by the IMF shows that the inflationary impact of these higher shipping costs is not likely to recede before the end of the year.

An understanding of the nature and causes of both domestic and global inflation is crucial for the determination of appropriate monetary and fiscal policy responses. The US and most European Union member states have every right to consider stricter monetary policy via higher interest rates, due to the existence of low unemployment.

Source: Energy Industry News (energyindustrynews.net)

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