“Production is the only answer to inflation” – Chester Bowels
A small increase in inflation can be expected in every economy. According to CNBC, inflation rates are expected to rise no higher than the national average of 2 percent. Even though wages did not increase as predicted, the recent tax cuts are helping to control inflation.
What is Inflation?
The Bureau of Labor Statistics tells us that inflation can be defined as the overall general upward price movement of goods and services in the economy. Inflation in the U.S. is measured by using the Consumer Price Index or CPI. The CPI measures the variation in prices paid by consumers for goods and other items.
Causes of Inflation
Inflation can be caused by increased demand for a good or service with stagnant supply. An example of this would be the oil supply. When the demand for oil increases, but the supply stays the same, the price of oil will go up.
Current Inflation Rate
The current rate of inflation is 2.5% versus the 2017 average inflation rate of 2.14%. The average inflation of prices is between 2 or 3 percent a year in a normal economy. Small amounts of inflation are considered healthy for rising economies. However, large increases in inflation will lower the purchasing power of your money.
The chart below shows the predicted inflation rates from Statista.com through 2023.
Inflation Protection
During inflation rate increases, it is important that employers also increase wages to help combat the price increases for goods and services.
During times of inflation, you can increase your savings to help with the decreased purchase power of your dollars.
You can also find investment accounts to invest your money that will protect it against inflation rate increases.
Wrap Up
A small amount of inflation can be considered healthy for a growing economy. However, too much inflation can cause an economy to collapse. So, start protecting your money today.