What is "inflation"?

We talk and hear more and more often about inflation. Or about the price of products. Or about the minimum consumption basket. What is the connection between them and what does it mean for us? 🤔

Let's start with the beginning: the price of products and services can change at any time because that is how it is in a market economy. When growth is widespread, we talk about inflation. 📈

The evolution of consumer prices is a benchmark in the economy because it is related to the welfare of the population. Having the same income, the higher the prices, the less you can buy. For example, if the inflation rate is 7%, then the shopping basket is that much smaller than the previous year. Inflation also causes companies to pay increased attention to managing production, operational, and financing costs. 🕵

For balanced economic growth, generating development, price stability is a fundamental ingredient. In November 2022, in Romania prices increased by almost 17%, the highest level since 2003. The minimum was in May 2016, when there was a decrease of 3.46%.

Price stability = growth at annual rates of about 2%

By price stability is understood a rise in consumer prices with annual rates of approximately 2%, the inflation target level of central banks in the United States of America and the Eurozone.

Thus, in periods with a slow increase in consumer prices, companies allocate resources more efficiently, and the population can make better-informed consumption decisions. In this context, we witness an increase in productivity in the economy, with a positive impact on the well-being of the population.

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