Inflation is the rate at which the general level of prices for goods and services rises, leading to a decrease in purchasing power. It reflects the increase in the cost of living, meaning that as inflation increases, each unit of currency buys fewer goods and services. Inflation is typically measured by the Consumer Price Index (CPI) or the Producer Price Index (PPI).
Economists distinguish between different types of inflation, including demand-pull inflation, which occurs when demand for goods and services exceeds supply, and cost-push inflation, which happens when the costs of production increase, leading to higher prices for consumers. Moderate inflation is considered normal in a growing economy, but high inflation can erode savings and create uncertainty in the market. Conversely, deflation is the decrease in prices, which can also have negative economic effects.
Central banks, such as the Federal Reserve in the United States, often manage inflation through monetary policy, aiming to achieve a stable inflation rate that supports economic growth while maintaining the purchasing power of the currency.
Latest inflation statistics reveal a slight increase in the annual headline inflation rate, now at 2.3% for November, up from 2.1% in October. This rise was largely anticipated as households…