Which Countries Have The Highest Interest And Inflation Rates? (2024)

Accurate at the point of publication.

The 2022 spike in inflation came about thanks to a toxic co*cktail of events that began with the coronavirus pandemic in 2020 and was compounded by Russia’s invasion of Ukraine in 2022.

During this period and up to the present day, the challenge for policymakers and central banks worldwide has remained the same: to tame inflation.

The general approach has been to hike interest rates speedily and sufficiently in an attempt to slow down economies and put the brakes on rising prices.

Balancing act

But this is a balancing act, since the desire is also to avoid triggering too much economic damage and raising the spectre of recession.

The consequence of failing to achieve these goals is a de-stabilising period of spiralling prices. Against such a backdrop, some households and businesses find it harder to balance their books, struggle with payments, and generally plan for their futures.

Fortunately, signs have started to emerge this summer that policy setters worldwide are starting to get the better of the inflation argument.

In the US, for example, following an aggressive period of interest rate hikes, consumer price inflation stood at 3.2% in the year to July 2023 according to the country’s official Labor Bureau of Statistics. This was a slight uptick from the 3% recorded a month earlier, but far lower than the 9.1% recorded in the summer of 2022.

Encouraging signs

Similarly, in the UK, there are also signs that the 14 consecutive interest rate rises imposed by the Bank of England since the end of 2021 are starting to have their effect on soaring inflation levels.

From its 11.1% peak of October 2022, the UK’s inflation figure as measured by the country’s official data compiler, the Office for National Statistics (ONS), has subsequently fallen to 4% in the year to January 2024. This is still some way off the government’s 2% inflation target as imposed on the Bank, but suggesting that runaway inflation levels are now firmly in the rear-view mirror.

These are encouraging trends, but not all countries are enjoying the same rebound in their economic fortunes.

Mixed picture

Across the 40 or so countries – including the UK – that make up the Organisation for Economic Co-Operation and Development (OECD), for example, Turkey’s inflation figure stood at 47.8% to the end of July this year according to the country’s central bank.

Other ‘double-digit’ OECD members for the same period included Colombia, with an inflation figure of 12.1%, Hungary (20.1%), Poland (11.5%) and Slovak Republic (10.9%).Turkey, along with the UK, are both G20 nations, a bloc of countries that represent the world’s major economies and that accounts for 85% of global financial output.

Although Turkey’s inflation figure is undoubtedly high – largely thanks to the devaluation of its national currency, the lira – it remains dwarfed by fellow G20 member Argentina. See table 1 below.

Despite a dip in recent months, consumer prices in Argentina still rose by 113% in the year to July this year, according to the country’s central bank – their highest level since 1991. This means an item priced in the Argentinian currency at 100 pesos in July 2022 would have cost 213 pesos 12 months later.

Inflation in Argentina has been massively elevated since the country’s economy descended into crisis in 2018, when its foreign-debt obligations expanded to unsustainable levels and the peso collapsed against the US dollar.

Helping hand

The Argentinian experience might appear extraordinary, but there are two other countries where rising prices manage to outstrip even these elevated numbers.

Zimbabwe, for example, saw its annual consumer price inflation rate skyrocket to around 170% in June this year, according to the IMF, stoked by a sharp depreciation in the Zimbabwean dollar.

Trumping even this figure is Venezuela, where the inflation rate has nudged 400% in 2023 following years of economic underperformance and social upheaval.

Only option

The prolonged period of high and stickier-than-expected inflation worldwide has resulted in surging interest rates – one of the few financial levers that central banks have at their disposal to put a dampener on rising prices.

At the time of writing (August 2023), the Bank of England Bank Rate – which influences borrowing rates across the economy – stands at 5.25%, having been raised on 14 consecutive occasions since December 2021.

The story is similar in the US, where rates stand in a range between 5.25% and 5.5%, while across the Eurozone trading bloc as a whole, borrowing costs sit in a range between 3.75% and 4.25%.

For many UK households, the current elevated cost of borrowing is scary, since the Bank Rate has quite happily bumped along between the 1% and 3% mark for much of the 21^st century.

It’s not necessary to look too much farther afield, however, to see that things could be a good deal worse. See table 2 below.

Take Russia, for example, which recently hiked its key interest rate by 3.5 percentage points to 12% after its national currency fell below the psychological mark of 100 roubles to the US dollar.

In South America, central bank rates in Brazil and Colombia are even higher and both stand at 13.25% this summer. Unsurprisingly, in the face of a soaring inflation situation, borrowing costs in Turkey are also elevated, standing at 17.5%.

In war-torn Ukraine, the figure is 22%, the same as in Pakistan, with both countries trying to contain rising prices.

Given their surging inflation rates, it won’t be a shock to discover that both Venezuela and Argentina also share the dubious distinction of imposing some of the world’s highest interest rates on their borrowers.

This summer, the official cost of borrowing in Venezuela stands at a shade over 55% – an eye-wateringly high figure until you discover that in Argentina the figure is 118%, while borrowing costs in Zimbabwe stand at 150%.

The revelation won’t ease the cost-of-living crisis for Brits back at home, but it provides a salutary reminder of the benefits of living within a relatively stable economic environment.