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Inflation

  • Measures the increase of prices for goods and services in an economy over a period of time
  • Impact customers' purchasing power, less disposable income to maintain their lifestyle, reduce savings for retirement
  • Is tracked with consumer price index (CPI), producer price index (PPI), personal consumption expenditures price index (PCE), and the wholesale price index (WPI)
  • Deflation
    • When prices decrease in an economy, which increase the purchasing power
    • This impacts people who have loans because the money used to pay back might be worth more than the loan - leading to halt in spending
  • Demand pull inflation
    • High consumer demand for a product pulls the prices to rise
  • Cost pull inflation
    • Raw material, labour increases the price of the product
  • Built-in inflation
    • Consumer expectations that inflation will continue in the future causes the price to increase
  • If it is managed, it can be beneficial to the economy but if left unmanaged it can be impossible to recover from