Insider Monkey
20 Countries With Lowest Inflation Rates In The World
Ramish Cheema
9 min read

In this piece, we will take a look at the 20 countries with the lowest inflation rates in the world. If you want to skip our analysis of the current global macroeconomic environment and why inflation has become one of the hottest topics over this past year, head on over to 5 Countries With Lowest Inflation Rates In The World.

Inflation is the bane of existence for governments, economists, business people, and ordinary people. Politicians hate it because it costs them votes, economists hate it because it becomes hard to control, and the remainder hate it because it can cause a rapid deterioration of wealth and make living difficult.

Yet, inflation has become a global problem these days. While it is on a downward trend from the peaks of last year, the rate of price increases is yet to fall to levels that are considered stable. The initial bout of inflation came in late 2021 as the money sloshing in the economy due to stimulus spending during the coronavirus pandemic rapidly increased purchasing powers. However, central banks around the world believed that this would be transitory and disappear once the cash was spent. Yet, reality, always ready to shock, struck back hard in the form of the Russian invasion of Ukraine. The invasion caused a rapid spike in crude oil and commodities prices, and as these made their way into the economy, prices continued to rise.

But just how fast was this pace of increase? Well, in the U.S., inflation first started to rise in August 2020 but the jump remained below the Federal Reserve's target of 2%. However, a year later the picture would dramatically changed, as during August 2021, the reading stood at 5.25% - well above the target. At the time though, officials at the Federal Reserve believed that this would be transitory, a costly mistake that would manifest itself later on. Inflation would go on to peak in America at a stunning 9% in June 2022 - at a time when the Fed would have started to aggressively increase interest rates in large chunks of 75 basis points. Since then though, inflation has come down in America, but the same isn't the case in other regions of the world.

Another developed country that was one of those hit hardest by inflation is the United Kingdom. While America does not rely significantly on global commodities and energy markets due to ample natural resources, the U.K.'s fortunes are tied closely, especially to the price of natural gas. And the turmoil ushered in due to the Ukraine invasion dealt a heavy blow to Britain. At a time when Americans were facing 9% inflation, the British were battling a 9.4% rise. Yet, even as U.S. inflation would peak there, inflation in the U.K. would go ahead and further rise to 11.10% in October 2022  before starting a downward trajectory. In Britain though, the latest inflation data for May 2023 shows that it remained at 8.7% from April but in a small respite, it did mark a small drop from the 9.1% in May 2022.

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