Figure 6 World inflation (*) a) Headline inflation  b) Core inflation  (annual change, percent)  (annual change, percent)  U.K. U.S.  10  10  Latin America Eurozone  8  8  6  6  4  4  2  2  0  0  -2  -2 00 02  04  06  Eurozone Latin America  U.K. U.S.  00 02 04 06 08 10 12 14 16 18 20 22  08 10 12 14 16 18 20 22  (*) For Latin America, the simple average of annual inflation of Brazil, Colombia, Mexico, and Peru is used. Sources: Statistics bureaus of respective countries. 13  Figure 7 Waiting times at Chinese ports (average wait, in days)  3.5  China  Shipping costs (1) (index, 2018=100)  1,400  Shanghai  Commodity prices (2) (index, 2018=100)  From China to the U.S. From China to Europe  1,200  3.0  Natural gas Oil (3) Wheat Metal index (4)  250  1,000  2.5  300  200  800  150  2.0 600 1.5  100  400  1.0  200  0.5  0 20  21  50 0 18  18 19 20 21 22  22  19  20  21  22  (1) Rate for transporting a 40-foot container on the respective routes. (2) For natural gas and wheat, one-month futures are used. (3) WTI-Brent average. (4) S&P GSCI Industrial Metals. Source: Bloomberg.
But they affected most of all those with high public debt levels, a lack of fiscal space, fragile market access and, especially, low growth. Sovereign risk was then transmitted into the domestic banking sector through two channels. The first was through banks’ direct exposures to their own governments’ bonds. Between January 2010 and July 2012, banks in Greece, Italy and Portugal incurred aggregate losses on sovereign bonds of vulnerable countries2 amounting respectively to 161%, 22% and 36% of their Core Tier 1 capital. 3 Regardless of whether these losses directly affected regulatory capital4, they had an adverse effect on perceptions of solvency in those national banking systems. The second channel was via negative confidence effects. Because the public sector makes up roughly half the economy in many euro area countries, and because of credit rating dynamics, the fear of possible sovereign defaults had a dramatic effect on confidence in the domestic private sector. Any distinction between firms and banks, and between banks with and without high sovereign exposures, disappeared. The general loss of confidence in these countries’ prospects reverberated through the banking sector via a further fall in growth.5 In this way, the crisis spread to banks that did not have significant exposures either to US subprime assets or to domestic real estate, and therefore had not until then needed to be bailed out.