Rising prices: Year-over-year global inflation rates as of July 2008. (Sources: Reuters, Associated Press, International Monetary Fund, Bespoke Investment Group)

For those who remember, this is nothing like the mid-1970s when the so-called oil shock caused inflation — and interest rates — to shoot into double digits, not unlike where they are now in struggling economies such as Russia and Pakistan.

Still, global inflation is clearly on the rise. The International Monetary Fund said that the rate of inflation for the top 70 economies is likely to breach the five per cent mark by early fall and that it is on the advance in both emerging and developed nations.

The U.S. emphasized that point last week when its most recent consumer price index for June showed inflation running at a five per cent increase from a year earlier, the biggest year-over-year change since 1991.

So far, because Canada is an energy producer, this country has been sheltered from many of the inflationary problems inflicted on some of our big trading partners, including Britain where inflation has just hit an 11-year-high (3.8 per cent) and has put pressure on the Gordon Brown government to raise interest rates to try to rein it in.

But Canada's sheltered position is likely to change. The Consumer Price Index was running at 3.1 per cent year-over-year in June, up from 2.2 per cent a month earlier.

But even this new rate for June 2008 doesn't tell the full story. As Bank of Canada governor Mark Carney noted last week, the nation's rate of inflation will likely rise to about four per cent by early 2009.

That is well above the bank's so-called target rate for inflation. Breaching that target is usually cause for the bank to increase lending rates in order to slow the economy and bring consumer prices down. Unless, of course, the bank or the federal government decides the problem is really one of economic stagnation — in which case some sort of economic stimulus is usually called for.

Variations of these twin policies are currently being played out across the industrialized world. But the thing to keep in mind about inflation is that it is an annualized rate based on what was happening a year earlier.

So a four per cent inflation rate in January or February of 2009 would represent a four per cent increase in mainstay consumer prices over what they were in the same period in 2008, when high oil prices were already starting to push up the cost of living.

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Inflation rates and their drivers in selected countries in June 2008

Country	Inflation rate	Key drivers	Interest rate (year ago)
Canada	3.1%	Fuel, housing prices, baked goods	3 % (4.5 % )
U.K.	3.8 %	Energy, housing	5 % (5.75 %)
Central Europe	4 %	Energy, food, housing	4.25 % (3 %)
Australia	4.3 %	Fuel, housing, credit	7.25 % ( 6.25 %)
U.S.	5 %	Fuel, housing, credit	2 % ( 5.25 %)
Mexico	5.26 %	Food, wheat, energy	8 % (7.25 %)
India	6.02 %	Food, energy, credit	8 % (7.75 %)
China	7.1 %	Food, fuel	7.47 % (6.84 %)