Inflation

What is Inflation?

• A sustained increase in the general price level of goods and services.
• Decline of consumer’s purchasing power over a given period of time.
• Inflation is commonly measured with the use of The Consumer Price Index (CPI) and the Wholesale Price Index.
• Percent Inflation Rate = (Final CPI Index Value/Initial CPI Value) x 100

Causes of Inflation

Demand-Pull Inflation, Cost-Push Inflation, and Built-In Inflation

• An increase in the supply of money such as through printing and giving away more money to citizens will cause inflation.
• Value of money decrease when there’s an increase in money supply which leads to inflation.

Hong Kong

• 1.3% inflation rate 
• Low inflation rate due to the Covid-19 pandemic as consumer consumption decreases.
• Slower increases in the prices of basic food, particularly fresh vegetables.
• Starting to relax Covid-19 curbs, increased consumption, and government aid.

United Kingdom

• 9% inflation rate, the highest level since 1982
• Due to the high inflation rate, consumers’ living standards decrease and the poverty rate increases.
• Prices of goods and services are higher which leads to lower purchasing power and a decrease in daily spending.

United States

• 8.6% inflation rate, its highest level since 1981
• Consumers’ purchasing power decreased.
• Pensions, savings, and treasury notes all lose value.
• Loans with variable interest rates rise when inflation rises.