What generates inflation?

A series of factors in the sphere of demand and supply in the economy:

➤⠀acceleration of the demand for goods and services;

➤⠀intensification of production costs;

➤⠀excess money supply in the economy;

➤⠀inflation spiral – salaries;

➤⠀intensification of expectations regarding the medium-term consumer price dynamics.

An increase in consumer prices at high rates for a longer period of time induces costs in the economy, among which:

➤⠀distortions in companies' investment decisions – when inflation persists at a high level, firms cannot concretely identify the demand dynamics in their activity segment;

➤⠀the decrease of the purchasing power of the population, with an impact at the level of productivity in the labor market;

➤⠀menu costs (determined by price updates);

➤⠀redistribution of income, from creditors to debtors.

You can find more details about all of the above in our article on the Blog: „Inflation now, a spike”.  🙂