How does inflation happen?

Waiting for the answer to this one question! This year's inflation forecast in Argentina is greater than 70%, and I can assure grocery prices go up way more than that. So, I'm beyond interested in getting to know the root cause😂

An interesting topic related to this is quantitative easing vs. quantitative tightening. No clue about interconnection! There should be an app for that 😆

Inflationary concerns might have you wondering, “Why does inflation increase?” There are many reasons why inflation is so high these days, including: Covid-19 Pandemic Experts speculate that the primary reason for inflation in America is the excessive money supply during the pandemic. The $1.9 trillion coronavirus relief fund provided $1,400 to each household, at nearly zero interest rates. Unable to spend all that money during the lockdown, most of it was saved up, and immediately after restrictions were lifted, a spending spree began. High demand for goods trumped companies’ ability to supply, leading to higher prices. Higher Demand When consumers suddenly have more money than what they are used to, they will have more spending power. A sudden increase in spending power means increased demand for goods beyond the economy’s standard production capacity. At this point, elevated demand causes prices to rise, and buyers will have no choice but to pay higher rates for these essential commodities. The inflationary effect of this demand-supply gap is called ‘Demand-pull’ inflation, the most common factor that drives severe inflation. This inflation can be mitigated when buyers engage in sudden wealth counseling to manage their excess funds better. Constrained Supply Chains In some cases, the demand for a product or service remains the same, but due to unprecedented supply constraints, they would be scarce. For instance, the pandemic caused many factories to shut down, and freight companies reduced global shipping. Finished products have become more scarce and costly, so suppliers can charge more for goods and services regardless of the prevailing demand. The type of inflation caused by this driver is called ‘Cost-Push’ inflation. You can learn more here - https://interactive-wealth.com/w...

Inflation occurs when the general price level of goods and services in an economy rises over time. This can happen due to various factors, such as increased demand, rising production costs, or changes in supply and demand dynamics. When there is more money circulating in the economy than the production of goods and services can support, it can lead to an increase in prices. Inflation and recession are interconnected in the sense that they represent opposite ends of the economic spectrum. Recession is characterized by a significant decline in economic activity, leading to lower employment, production, and spending. Central banks often use monetary policy tools to balance inflation and recession, aiming for stable economic growth. The core inflation forecast for 2024 and 2025 is little changed at 4.6%, and 4.5% in 2026. Services inflation in 2023 was 4.2%. The forecast for 2024 services price inflation remains unchanged at 4.8%. Headline inflation was 6.0% in 2023. Stats by sassastatusportal blog.

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