Alarming Inflation Both At Home And Abroad As Russia-Ukraine Crisis Drives Up Oil PricesNews

Whether it’s dining out or filling up cars at the pump, the cost of living is rising and it’s a global trend.
Consumer prices in the United States jumped 7.5% in January from a year earlier, their biggest increase in 40 years.
The President of the European Commission expects price growth to “probably remain elevated for longer than expected.”
For more on the price hikes and their impact on the economy, we have our business correspondent Eum Ji-young here in the studio.
Welcome Ji-young.

Hello Conyoung.

High inflation also worries South Korea, Jiyoung said, where consumer prices remained well above the central bank’s target in January.

Yes Connyoung. Consumer prices in South Korea have risen more than 3% year-on-year for four consecutive months.
Statistics Korea said its consumer price index was 1-104.6-9 in January, up 3.6% year on year.
It’s been about 10 years since the CPI rose more than 3% for four consecutive months.
The CPI rose above 3% in October for the first time since 2012, well above the government’s 2% target.
Major items on people’s shopping lists have become more expensive. Eggs, for example, are up almost 16% year-on-year.

“I did some shopping during the Lunar New Year holiday and compared to last year, the items on the shopping list, including eggs and vegetables, have increased. The cost of eating out has also increased. increased by about one or two thousand won. As a housewife, I can really feel the prices going up and it’s hard with the income remaining the same.”

Many people, myself included, enjoy going to cafes, but now consumers also have to pay more for their lattes, Americanos, and other drinks on the menu.

It’s true. After Starbucks Korea raised its drink prices by about 30 US cents last month, other cafes across the country followed suit.
Prices are also rising at hamburger restaurants in South Korea. Customers will have to pay up to 25 US cents more for their burgers at McDonalds starting Thursday.
The average price of 30 dishes on the menu increased by 2.8%.
Many other fast-food franchises, including Lotteria and Burger King, have also raised prices, citing the higher cost of ingredients and logistics.
It’s not just these big franchises As food is one of the main things getting more expensive, it puts pressure on restaurants to raise their prices.

“The ingredients have become much more expensive, so I’m thinking of raising the prices.”

The cost of restaurant meals in South Korea rose 5.5% last month.
The price of ramen rose 7% year-on-year last month, grilled pork belly rose nearly 6%, and gimbap, or seaweed rice rolls, rose about 8%.

“Previously, when my family of three dined at the restaurant, it cost around 20,000 won. But now it costs around 30 to 40,000 won.”

And it’s not just South Korea.
Anyone going on a date on Valentine’s Day had to pay extra for flowers and a table for two.
The price of a good steak jumped 154% over the previous year, roses cost 22% more and diamonds 15% more.
An expert says the reason for such high inflation is mainly due to the pandemic.

“Global inflation, I believe, has three reasons. The first is that supply and transportation bottlenecks. And that’s basically because of the pandemic, different, different countries, different stages, and some countries haven’t overcome the pandemic. They still haven’t vaccinated much. Then the second reason is rising energy prices, especially oil and natural gas prices. And then the third is Since last January, January 2021. US spending has increased a lot and it’s mostly biased towards durable goods, manufactured goods. So that hit the bottlenecks.”

Not only have food prices jumped, but global oil prices have also skyrocketed, and the Russia-Ukraine crisis could make the situation even worse.

Yes it’s true Connyoung. Rising world oil prices have pushed up inflation.
But if Russia invades Ukraine, it could further derail crude oil supplies and potentially push up prices that are already at seven-year highs.
Oil prices have surged well above $90 a barrel in recent weeks amid growing risk of a Russian invasion.

“Russia is the largest exporter of crude oil and accounts for 12% of global crude oil production. Therefore, the current geopolitical risks are driving the rise in oil prices.

JPMorgan predicts that if Russian crude exports are disrupted due to tensions with Ukraine, oil prices could rise as high as $120 a barrel.
He also pointed out that if Russia cut its oil exports in half, Brent crude would likely hit record highs of $150 a barrel.
This would have ripple effects for consumers around the world.

“Among the 37 members of the OECD, South Korea is the most dependent on crude oil. If oil prices increase, the production costs of domestic companies increase relatively more than other countries.”

South Korea’s high inflation in January was driven by high fuel prices, even without the Russia-Ukraine crisis, despite the government’s biggest ever fuel tax cut of 20%.
The price of gasoline has climbed by almost 13% year-on-year and that of diesel by more than 16%. The government said it would monitor prices closely and consider extending tax cuts or releasing oil reserves if needed.

So, with inflation soaring, what are some of the key measures governments can implement?

According to experts, central banks will increase their key interest rates to reduce the liquidity of the economy.
Listen.

“Currently, the Bank of Korea’s policy rate is at 1.2-5%, but by the end of the year, I believe it will be raised to 1.7-5%. Although the rate is already at the level it was before the pandemic, further rate hikes are expected in order to keep inflation under control.”

“What they can do is raise the interest rate, which may reduce US consumer spending and alleviate the problem somewhat by reducing the money supply. They may also be able to limit some of the speculation in the commodity markets that we can see.”

Ji-young, thank you for today’s detailed report.

Thank you for hosting me.

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