What is Inflation?
Inflation occurs when the cost of goods and services increase and the purchasing power for a given currency decreases. When prices rise too quickly it can signal that the economy is “overheating”, while very low inflation can signal economic recession. Steady or predicable levels of inflation are considered positives as they signal healthy growth in the economy. There can be many driving forces behind inflation including demand-pull inflation, cost-push inflation, and built-in inflation. The Consumer Price Index and the Wholesale Price Index are the most common inflation indexes.
Why is it important to understand Inflation?
Inflation impacts all aspects of the economy, including consumer spending, business investments, employment rates, tax policies, and interest rates. Consumers care about inflation because it impacts their cost and standard of living. From a business viewpoint, inflation impacts raw material costs and employment concerns like wages. It’s important to understand what’s driving inflation to better protect yourself as prices rise. Informed investment strategies are a strong was to combat inflation.
What should you do?
Understanding Inflation can provide greater clarity into the economy’s health as a whole. Majestic’s CORE Report follows Inflation indexes like the Consumer Price Index and Wholesale Price Index; along with other indicators every week to see where the market stands.